Swapping houses?

MrsB387

First of all, apologies if this has been asked before or if I've posted in the wrong place!

My husband and our two children live in a two bedroom terraced house, currently valued by the bank (drive by value) at £128k. We have £96k left on our mortgage.

My dad lives in his house, mortgage paid off and valued at around £210k - this is based on a guess at recent sales in the area and also we are in Scotland so it may be a bit off given the offers over process.

We need to move but are not in a situation to do so at the moment due to my husbands job. My dad wants to downsize. His solution is to either swap houses or us move into his and he buys a smaller house/flat.

My husband and I have a few queries - obviously we will consult a financial planner/solicitor to see if this is possible but wondered if anyone was around tonight to give us a little advice.

As I mentioned my dad is mortgage free and we still have a mortgage. It can't be as easy as just swapping houses and us continuing to pay what's left on ours?

If it's not as simple as this and we have to go down the route of altering title deeds etc, what does this involve? Although I'm not entirely sure we would want to proceed with this if that was the case as I have a sibling. My husband's (and mine although I know we are almost always treated equally) worry is surely she would loose out somewhere?

What are the tax implications - I understand my dad can gift us this house and we wouldn't be liable for inheritance tax if he didn't pass away within the next 7 years. Have I understood this correctly?

We really would appreciate any advice. This has only came up tonight as an option.

Thank you.

MrsB387

Anyone got any advice they can give?

TBagpuss

If you swap, you may well be able to 'port' your existing mortgage so it is secured over the new house rather than the old one. The mortgage company would need to have a valuation of the property and you would pay for that. Whether you can do this or not would depend on the terms of your mortgage. The lender would also reassess you on affordability.

You and your dad would need to get the title deeds transferred ('transfer of equity') which would involve legal costs, and you would each need to get separate advice.

In terms of the inheritance, it would be possible for your dad to update his will to split his remaining estate unequally between you and your sister - if your dad's house was transferred to you with no payment, then he would be effectively gifting you £82,000 (£210K - £128K) He could make a will leaving your sister the first 64% of the value of your old house before his estate was split, or simply record in his will that the transfer of the house was to be seen as an advance on your inheritance and taken into account when he ultimately dies and the estate is distributed. He would need to take advice about the best way to do this.

Another option would be to treat the extra £82K as a loan which would then be repayable to your dad or his estate.

As an alternative, he could sell his house and could chose to give you and your sister each some of the 'surplus', if he wished - that would avoid any fears about unfairness, and if he chose to go down that route you could then use your share of the gift to move house. Would you be able to increase your mortgage so that you could move into his house (if you wanted to) to give your sister £41K and for you to be gifted £41K of the equity?

I am not sure what the tax implications of any transfers would be.

I'd recommend that your dad see a solicitor who is a member of STEP and preferably also of Solicitors for the Elderly, as they should then have the appropriate expertise to advise him about the ramifications of different options.

Be aware tat the options which would be most advantageous for your dad may be different from those which would give you (and your sister ) the greatest benefit.

MrsB387

Thanks for the info and sorry about the delay in getting back to you.

We have since spoken to a financial advisor, we were seeing her about something different. She is quite sure that we could go ahead and swap houses but no need to transfer deeds etc as no one is gaining anything, possibly just update dad's will to consider my sister and to ensure we wouldn't end up out on our ear if something happened to dad. But of course we need this verified so she has, like you advised us to speak to a solicitor. Can I ask, what does STEP stand for?

Just to add a little background, my dad isn't elderly. Early 50's. His decision to move is due to losing my mum last year. He just feels the house is too big/empty. And although we have a good chunk saved for a deposit my husband's job as a contractor is just not stable enough for us to take on the responsibility of a bigger mortgage.

CLAPTON

MrsB387 wrote: »

Thanks for the info and sorry about the delay in getting back to you.

We have since spoken to a financial advisor, we were seeing her about something different. She is quite sure that we could go ahead and swap houses but no need to transfer deeds etc as no one is gaining anything, possibly just update dad's will to consider my sister and to ensure we wouldn't end up out on our ear if something happened to dad. But of course we need this verified so she has, like you advised us to speak to a solicitor. Can I ask, what does STEP stand for?

Just to add a little background, my dad isn't elderly. Early 50's. His decision to move is due to losing my mum last year. He just feels the house is too big/empty. And although we have a good chunk saved for a deposit my husband's job as a contractor is just not stable enough for us to take on the responsibility of a bigger mortgage.

there is nothing to stop you living in your father's house and him living in yours

however you will not own his nor him yours.

with your father so young he may live for 30/40 years and much can happen in that period (remarriage etc)

it would be better if you devised a legal situation that regularised the ownership.

xylophone

How would you/your father feel about all living in his house (and sharing bills) while you ask your lender for permission to let your house?

MrsB387

xylophone wrote: »

How would you/your father feel about all living in his house (and sharing bills) while you ask your lender for permission to let your house?

This wouldn't solve our problems of needing an extra bedroom sadly. We have two children who currently share. One needs considerable more sleep than the other which can make life difficult. Whether or not this was on offer a move was always on the cards for us. This just seems like the most sensible option for all. My dad had actually spoke of buying himself a flat and us letting our house but I fear downsizing from a 3 bedroom townhouse to a flat may just be a downsize too far too far for him.