Gifting a house - implications?

btfabregas

Hi all,

Just wondering if anyone had any experience/knowledge on gifting a family home to children in the UK.

Current situation is as follows:

Family home with current residents being father and son. Father owns home and wants to gift this to son. the house has been valued at around £170,000.

The issue is that the father will continue to live in the property which will be then owned by the son (ie continue to benefit from the property).

My questions are:

1) What are the tax and cost implications of gifting a property in this way?

2) If the father continues to live in the property, does this mean there are more tax implications?

3) If the father pays market rate rent (how is that worked out?), does this then absolve of any inheritance taxt/ POA tax ?


Any other issues /points I've not thought of , please feel free to contribute!

Thanks

Mojisola

Will you continue to live in the house?

How old is your father and what's his health like?

Is this an attempt to avoid paying care home fees?

btfabregas

Yes will continue to live in this house.

Father is 58 and in good health.

Should have mentioned this in original post, but main reason is that we are looking to remortgage the house in 6 months to a years time in order to improve current house and potentially buy more property. Current remortgage/loan options on father's name alone are not the best due to length of period offered to him.

hunnie

Hi, You say "current residents being father and son"
I was in this situation with my late mother.
All we did was add my name to the deeds (home was mortgage free).
A few years later we needed to raise a mortgage to pay for alterations to the home to accommodate mums growing frailty. We had to take mums name off the deeds as they wouldn't lend at her age.
It all depends on the ages of these relatives now and how long it would be before care was needed.
If the son moves out then that complicates things.
regards
Hunnie

btfabregas

Hi Hunnie,

Thanks for your comments. This indeed is a very similar situation. I am 25 years and dad is 58 (can't really judge when care would be needed but he is in very good health), but Im coming across the same issues that mortgage providers would not lend favourably if his name is on the house.

I have read online that if the house deeds are changed in this way, it would be considered as a gift, and then the parent would have to pay market rate rent on the property if they did not own it anymore but continued to live with me. I'm tentative with allowed my father to do this if it means he will have to be a considerable amount of tax.

hunnie

Hi, " the parent would have to pay market rate rent on the property if they did not own it anymore but continued to live with me"
Isn't this just if you move out?
Mum didn't pay me any rent
Don't think this applies if you both live there.
You and your father are younger than we were though. I got my current mortgage at age 60. Had to be repayment and to be repaid by age 75. It's with Nationwide.

Annisele

If your father does gift the property to you, that leaves him in a very vulnerable position.

If you marry and then divorce, the house will be counted as part of your marital assets - so it might have to be sold for you to pay off your spouse. Similarly if you go bankrupt, or have some other catastrophe happen to you. Or if you just decide you don't like him and would like to chuck him out. (I very much doubt you'd go for the last one - I mention it to illustrate just how vulnerable it makes him).

If you're wanting to take out a mortgage on the property, that might mean you struggle to get a second mortgage on another property. In ten years' time you could potentially be married and wanting children - and being tied to your father's property could be a problem for you.

How much are you wanting to borrow, and can your sole income support that mortgage? Is there are mortgage on the property now, and if so how much is it?

Thrugelmir

Annisele wrote: »

If your father does gift the property to you, that leaves him in a very vulnerable position.

One assumes the father would retain a life interest to protect himself.

Annisele

Thrugelmir wrote: »

One assumes the father would retain a life interest to protect himself.

That would certainly be sensible for the father - but it'd make it more difficult for the son to get a mortgage on the property. Any lender would want to check that adult occupiers who weren't party to the mortgage had no interest in the property, but in that case the father would have an interest.

btfabregas

I agree that leaves in him a vulnerable position. It's something which we continue to discuss in order to see if it is the right option.

I wanted to understand the whole picture, because if "gifting" is something that is going to have endless issues then it's something we would probably rule out.

There is no mortgage on the current property. would possible want to borrow 70k over 25 years and at the rates I've been quoted, that would be very affordable.