Taking over a mortgage

Shane_l_2

I currently live in a property mortgaged by my in-laws. My partner and I pay rent with is equal to the mortgage repayments of 800 a month. With my in-laws getting on in age the mortgage repayments were set high due to them not having many working years left. My question is a simple one is it possible to take over the mortgage from them without a deposit and rescale it over mine and my partners income and reduce the repayment over a longer time. Please before anyone posts about saving for a deposit. This is unlikely to happen simply due to the fact over the 5 years we have been living here any extra money has gone to pay the mortgage off quicker. We only moved into the property after the in-laws had troubles with previous tenants not paying and damaging the property itself raking up a £8,000 bill and absconding from the country. So no funds could be recovered. The property is worth an estimated £190,000 with an outstanding mortgage of approximately £85,000

leccyblue

You can't just take over the mortgage, as it doesn't work like that. You would need to purchase the property from them.

But there is a way around doing it without a deposit. You could do this as a 'concessionary purchase' from a family member, where the deposit is in the form of gifted equity from the in-laws. Some lenders accept this, including Abbey for example. You'd need to establish how much your in-laws would accept for the property, and then see if there is enough equity in the house to cover the 'deposit'.

For example. If the inlaws were happy to accept £150,000 on the property and the house was valued at £190,000 by the lender, your loan-to-value would be 78%. Which means you would take out a mortgage for £150,000 and the £40,000 equity remaining in the property would be gifted to you by the in-laws and seen by the lender as a deposit.

Definitely one for a whole-of-market broker.

kingstreet

Parents cannot continue to live there after a concessionary purchase and if the purchase price is above £125k stamp duty payable.

Lender may be willing to add you to mortgage/ownership under a transfer of equity.

Caz3121

assuming the in-laws do not live in the property and are planning on selling for less than the property value, they need to look at deprivation of capital
eg if they sell you a £190k property for £100k they have in theory given away £90k of their own money and the benefits people will treat them as if they have this £90k so if they ever need means tested benefits they will find that they will not qualify

holly_hobby

It appears from the OPs post that they moved into the property when the in laws tenants became a nightmare and did a midnight flit !

Shane_l wrote: »

We only moved into the property after the in-laws had troubles with previous tenants not paying and damaging the property itself raking up a £8,000 bill and absconding from the country.

So, BO/GWR isn't an issue re the OP purchasing the property from them either at full or under value, as the in laws dont and wont (as far as I can tell) reside there post completion.

The points that are relevant are .....

1. They will need to source a lender happy with family discounted (concessionary) purchases, and are happy to use the effective discount as the deposit - of which there are several (assuming OPs stauts meets criteria).

2. As a connected transfer, the in laws will be subject to CGT based on the difference between acquistion price to current market value (less qualifying exemptions/releifs for each individual, such as lettings relief - max 40k pp, PRR, personal unused CGT allowance - currently £10,900 pp at 2013/14 rates), substantiated acquisition, disposal and improvement costs, any prev reproted CGT losses).

3. However, although CGT is based on market value, the OP is only liable to SDLT on the actual pch price (or consideration), which if under 125k and as Kings has noted above, will equate to nil SDLT to pay.

4. Any discount to market value will be classed as deprivaton of asset and will affect any means tested benefits/care application. Whilst it will be classed as a PET in respect of IHT (relevant if the in laws pass within 7 yrs of transfer, and their net estate exceeds available nil rate IHT threshold, currently 325k pp)

Simple placement for an experienced broker, in laws may want to take some take advice re CGT liability and reporting.

Hope this helps

Holly

Thrugelmir

Shane_l wrote: »

I currently live in a property mortgaged by my in-laws. My partner and I pay rent with is equal to the mortgage repayments of 800 a month.

Sounds as if no allowance has been made for the fact that the rent you've paid is taxable income in the hands of your in-laws. Something you need to resolve. Given that letting of property is high up on the the HMRC's agenda now.