Buying house off parents

missmemmo

Hi the position I'm in at the minute is basically my parents own a house which they rent out which still has a mortgage on. In a years time they are hoping for me to take over the mortgage and either carry on renting it out or me to move into it with my partner.
I wondered if this was possible and how to go about it?
Would my parents have to sell the house to me in order for me to take on the mortgage? Or could it be transferred into my name and I become the landlady?
Also, if they do sell it to me, could they sell it to me for the cheaper price of what is left on the mortgage, or would they have to sell it to me at what they purhased it for? Or the amount that it is worth now?
Any help would be great
Thanks

BitterAndTwisted

You can't "take on" another person's mortgage. They will have to sell for enough to settle their own mortgage and if necessary you will have to raise one of your own if you can't buy it with cash.

If you intend to be a landlord rather than occupy the property yourself you will likely have to apply for a buy-to-let mortgage which requires a 25% deposit and the proposed rent is at least 125% of the mortgage.

missmemmo

Ok thank you.
So if the property is worth £150,000 but my parents mortgage on it is only £100,000 could they sell it to me for 100,000 as that then covers the mortgage?

BitterAndTwisted

Yes, that is correct. The mortgage company have no interest in any profit your parents may have made on the sale. Other organisations might, depending on their circumstances now or in the future.

Lavendyr

missmemmo wrote: »

Ok thank you.
So if the property is worth £150,000 but my parents mortgage on it is only £100,000 could they sell it to me for 100,000 as that then covers the mortgage?

They can sell it to you for whatever they want. Among other potential considerations though, there could be inheritance tax implications if they sell you the house at an undervalue and then continue to live in it though so you should have a look at the HMRC website:

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#4

Yorkie1

Lavendyr wrote: »

They can sell it to you for whatever they want. Among other potential considerations though, there could be inheritance tax implications if they sell you the house at an undervalue and then continue to live in it though so you should have a look at the HMRC website:

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#4

OP states in post #1 that the parents rent the property out.

00ec25

they can sell it to you for any figure you agree, however as stated they will have to settle their mortgage in full on its sale

In addition, note that as your parents rent/let out the property then they will be liable for Capital Gains Tax when they sell it to you. Therefore make sure that whatever you pay them includes enough to cover the total cash they will have to pay ie 100K mortgage redemption plus CGT

noisla

When you are calculating capital gains tax, you may have to assume that the house is being sold at "market value" i.e. £150k for the tax calculations - because you are a "connected person" to your parents. You parents should check this out (e.g. HMRC website or get tax advice) to ensure they do their tax return correctly. They will have a annual allowance (about £10k?) each which is exempt from tax, so they may not end up with a tax liability in the end, but they may still need to submit a tax return to demonstrate this.

For inheritance tax, your parents have made a you a gift of the £100k they are knocking off the price. If they die within 7 years, there may be inheritance tax to pay on that gift.

You may want to get an independent valuation to support the tax position, in case you or your parents get challenged on it at any point in the future.