Selling my home to my daughter

sexymax

Hi everyone heres my situation. I currently have a endowment mortgage of £70,000 with no policy to match the final sum which matures Jan 2015. I`m also receiving pension credit ( which pays all the interest untill Jan 2015)
My future plan is this.
To get my 26 year old daughter( whos currently living in rented accommodation with her fiance) to buy the property for £70,000.
(current value £300,000.)To allow me to continue living there.
My thinking is that when she is ready to buy her own home this would be an asset for her. £300,000 - £70,000.= £200,000 equity?
Questions
1, Can I in fact do this?
2, Would the mortgage need to be "Buy To Let" being as she will not be living in the property?
3, how will the tax man view this?
4, Would pension credit then continue to help in any way with "my Rent"?
5, She is Self employed for about 3years but would that be such a negative considering the equity?
Thanks in advance for any advice.

Tancred

I believe that selling your house to a relative at well below market value would not be viewed kindly by HMRC. It would probably be viewed as a partial gift and subject to tax unless you take certain legal steps.

BitterAndTwisted

This plan has more holes in it than a sieve!

If you don't have the funds to settle the mortgage once the term ends you should sell it and buy something with the £230k's-worth of equity you have built up. Doing anything else would be foolish, most especially being dependent on someone else for the roof over your head, even a family member. Cancel that, ESPECIALLY a family member!

DigForVictory

While your daughter is not a Connected Person, her fiance will be.
Have a dekko at http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm and reconsider the whole idea?
With a trust lawyer, if you're determined to make your roof hers...

iancrt

BitterAndTwisted wrote: »

t especially being dependent on someone else for the roof over your head, even a family member. Cancel that, ESPECIALLY a family member!

If someone that goes by the name BitterAndTwisted gives that sort of advice you just know its good advice! :rotfl:

angelsmomma

Also deprivation of assets to be considered

BitterAndTwisted

In the first instance look up "Deprivation of Assets" and the second "Contrived Tenancy".

Even if your daughter could raise a Buy-To-Let mortgage on the property many, many lenders will not allow the tenant to be a family-member of the landlord.


That's not even taking on-board the possibility that as soon as your daughter marries the roof over your head will become a joint-asset of her marriage. Then, in the event that their marriage fails your home might have to be sold to give your future son-in-law his share of the property.

There are very likely other, even more compelling reasons why you should not countenance doing such a thing.

Strapped

And how will you pay the co-owner of the house, based on your previous posts? (Mother of your kids).

sexymax

Well spotted "STRAPPED" I didnt mention her as thought it might complicate matters?She doesn`t want any of the equity (so she says) ??
Did I approach this from the wrong direction maybe..I mean if she could somehow raise the £70k ..all could be ok. could I some how give her a percentage of the property .?

Yorkie1

So, you have an interest only mortgage of £70K on a property worth £300K but no endowment or other way of paying it off when the term ends in 2 years - have I understood it correctly?

You would like to sell the property to your daughter for the £70K, remain living there, and she will not move in - but she will need a mortgage?

I think this is difficult on many practical levels, some of which are:

1. Lenders are not happy with previous owners remaining in situ after the sale has completed, as it makes matters far more complicated for them should they need repossess. This alone may make it a non-starter.

2. Even if that wasn't an insurmountable problem, your daughter will need a regulated BTL because you are living there. These are fewer to find.

3. The sale money will be declarable so may affect your pension credit entitlement (I am not an expert).

4. If you pay your daughter any money towards rent, she will need to comply with all the laws re. being a LL. Is she prepared for this? Any income would have to be declared to the taxman by her.

5. As others have mentioned, you will lose any security in the property. It becomes at risk if your daughter has any financial problems (particularly because you mention she is self-employed), or if she marries and then splits up with her OH.

6. There may well be deprivation of assets issues if you give away £230K of assets and then try to claim means-tested benefits, so you would be denied those benefits.

7. If you wanted to claim housing benefit from your daughter, this may be refused on the grounds that it is not a formal, at-arms-length tenancy (i.e. where a market rent is charged and you would be evicted if you fell behind on the rent) - this is what is referred to previously as 'contrived tenancy'.

I think you need a different plan.

Annisele

Apart from the issues other people have mentioned, I don't think your plan is fair to your daughter.

From your other posts, I think you're now receiving Support for Mortgage Interest (SMI) due to the pension credit. If you no longer have a mortgage, you won't get any SMI. You won't get Housing Benefit for a house you used to own.

So, from the sounds of it you wouldn't be able to afford to pay rent to your daughter, and she'd be funding the mortgage herself. That would restrict the amount she could borrow when she came to buy her own house.

But I think the whole thing will fall down for Yorkie1's first reason - I don't think your daughter would get a mortgage if you stayed in the property.

If she moved in with you (with the intention of staying there) then you might be able to get a joint mortgage - but you'd probably still find lenders wanted the loan repaid before you get to 75, and that lenders would only entertain a repayment basis. That could be expensive. And anyway, that method doesn't sound fair to your daughter either.