Buying property from parents for less than market value- implications/ possible?

ses6jwg

Hi all.

Currently renting property from my parents. 2 bedroom terrace. Valued on the market at about £120k.

They have very kindly offered to sell me the property for what it originally cost them + renovation costs which is about £70k.

I have around £25k as a deposit. I have completed mortgage calculators with various providers and on my income/ outgoings I seem to be able to borrow £65-85k depending on provider.

My question is, is this possible? If so how is it done? is the equity gifted?

Are there any implications for my parents e.g. capital gains tax?

Bit of a minefield.

Currently looking at Post Office 2 year fix 2.38% with no booking fee.

Pixie5740

Are you going to live in the property? Are your parents going to continue living in the property? What exactly will be the set up if you buy the house from them?

ses6jwg

Pixie5740 wrote: »

Are you going to live in the property? Are your parents going to continue living in the property? What exactly will be the set up if you buy the house from them?

:money:

I currently rent the property from them. I will continue to live in the property.

Pixie5740

In that case there's not much implication for you other than you getting a good deal.

Your parents could fall foul of deprivation of assets should they need a care home in their twilight years but it's not like they're giving their main residence away for peanuts so all in all it is unlikely to be that much of an issue.

pmlindyloo

Your parents need to investigate whether they would have to pay capital gains tax.

I'm not an expert but here'a link:

http://www.hmrc.gov.uk/cgt/property/basics.htm

Pixie5740

I'd forgotten about CGT...doh!

booksurr

ses6jwg wrote: »

I currently rent the property from them. I will continue to live in the property.

you have not answered the question do your parents live in the property along with you

if they don't then they will be liable for CGT based on the market value of the property, NOT what you pay them for it because they would be selling a property which is not (or at least no longer is) their main home and also fall under the CGT "connected person" rule

kingstreet

If they do not and will not reside in the property, you can carry out a concessionary purchase, using the gifted equity as your deposit.

However, CGT will still be based on the market value, not the consideration you have actually paid. In the case of stamp duty it is only the consideration which counts, so that means no SDLT as the consideration is below the £125,001 minimum.

ses6jwg

They do not live in the property so I guess that CGT will apply.

I have 25k to put towards it as well as the gifted equity does that make a differnece?

kingstreet

ses6jwg wrote: »

They do not live in the property so I guess that CGT will apply.

I have 25k to put towards it as well as the gifted equity does that make a differnece?

Does that make a difference to what?

It will reduce the amount you need to borrow, that's about it.

marymary37

We did it twice! We lived in both of the houses before we sold them to our sons. We never had to pay capital gains and neither son had any trouble with their mortgage lender and neither of them paid a deposit. We did sell both houses for their original purchase price and wrote a letter to the mortgage lender that we had made an "unreturnable gift",whatever that was supposed to mean!