Buying family members house before repossession. Help!

Pricivius

There are a couple of other issues to bear in mind, although a little further afield than those raised above...

- what happens if you and your wife divorce? Your properties are likely to be deemed marital assets and your wife would be entitled to her share. This could be a problem with the house your parents are living in.

- what if your parents divorce? I guess you would then sell the house and give them half each, but they would need £125k each, not £70k.

- are your parents going to pay you rent or live there for free? Rent makes you the landlord with all the headaches that entails, but for free could give you problems if your circumstances change and you can't afford the mortgage.

- you would also be responsible for repairs, maintenance, new windows/roof/boiler... so factor those costs in.

Lots to think about.

Thrugelmir

Dean_j wrote: »

Plus, that home is my inheritance, which in turn will be my kids inheritance, which in turn.....etc etc. that's what parents strive to do I thought. Leave a house to their children. That's my plan anyway

The equity is your parents. So best to act in their interests not yours.

The mortgage arrears maybe the tip of the iceberg.

PasturesNew

You could pay the arrears now, then pay them pocket money of half their mortgage for the next X years until the mortgage is paid off. That way it's their house, you don't have to raise a mortgage or be a landlord and it's something you can sort out easily.

Thrugelmir

PasturesNew wrote: »

You could pay the arrears now, then pay them pocket money of half their mortgage for the next X years until the mortgage is paid off. .

With interest rates only going to rise. The reason behind the arrears that have mounted is extremely important. There's been 5 years of ultra low interest rates. People that cannot cope won't be able to going forward.

PasturesNew

Thrugelmir wrote: »

With interest rates only going to rise. The reason behind the arrears that have mounted is extremely important. There's been 5 years of ultra low interest rates. People that cannot cope won't be able to going forward.

It'll buy some thinking time ... so the OP can sit and talk things through in a calmer mood with the parents, to decide what's best and see if it's working, or if the parents will never be able to dig themselves out of the hole.

We don't know why they're failing to pay at the moment, it might be a one off blip that set them on that road.

Doing this would buy some time, give them chance to look at restructuring without being in a rush ... and, if it still all went t1ts up, then the OP's minimised his problems and exposure.

booksurr

Sarahspangles wrote: »

When you buy the property from them, you will incur Stamp Duty on the assessed value, not on what you've paid. So 1% of £249k - because the rate jumps at £250k! - making £2,500. The conveyancing solicitor can't ignore this because you'll have to have a valuation to borrow against the house, and there has to be a formal declaration to HMRC.

you are confused. SDLT is not subject to an "assessed" market value even where the 2 parties are related ("connected persons") unless the sale involves a "linked transaction".

Op's plans for the sale of this property to a family member is not a linked transaction since only one payment would be made for the full property and no other transactions will take place to make a "link"

SDLT is charged on the price actually paid (chargeable consideration), if a 250k house is sold for £1 in a single transaction then the chargeable consideration is £1, not £250k, and no SDLT would be due as that is in the nil rate band

unless you can provide a different HMRC link ?
http://www.hmrc.gov.uk/sdlt/calculate/transfer-ownership.htm
http://www.hmrc.gov.uk/sdlt/calculate/linked-transfers.htm

franklee

The parents will be handing 95K of house to Dean and they will be losing their security of tenure. If they pay rent presumably they will have to be on an assured shorthold tenancy in order for Dean to raise a mortgage (if even that's possible). That's why sale and rent back has been clamped down upon. The homeowner wanting to sell cheaply to stave off repossession, even if done with the best will in the world, could still be evicted from their home despite handing over thousands of their equity. Dean might say that will never happen but who knows what the future holds. Dean or his family may face unexpected redundancy, illness etc. Family isn't strictly sale and rent back but has many of the pitfalls, what if the parents can't pay the rent, certainly the arrangement would need to be declared to all solicitors and the mortgage lender. If Dean won't evict the parents for non payment of rent then on what basis will the lender be giving the mortgage, they will want to know how it'll be paid if it's not a viable BTL business.

The parents could be given a life interest in the property to protect their security but then how would Dean raise a mortgage?

Also it is deprivation of assets - the parents have given Dean 95K's worth of house - but it's not an outright gift as the parents expect to be living in the property.

Dean I'd suggest you need to see a solicitor who specialises in inheritance planning. That may seem odd as it's an amicable family arrangement but the tax man and authority care, any big debts you owes in future etc. all still want their cut. If the objective is only to help the parents without receiving anything back then you could hand them the 10K and then help with their financial planning or towards monthly bills.

Also will you ever want to move house or remortgage your house to get a better deal, will any mortgage on your parents house prevent you getting another mortgage for your own house in future.

Just found this article, it seem you'd need to do the transaction at market rates if you want a mortgage:
http://www.thisismoney.co.uk/money/experts/article-2329000/Can-I-buy-parents-house-release-lump-sum-pension-fund-rent-them.html

kingstreet

I suspect if a lender will lend on this, gifted equity/undervalue purchase won't be allowed, so where's the deposit coming from?

Are you expecting to let to them and for them to claim Housing Benefit?

Nobbie1967

PasturesNew wrote: »

You could pay the arrears now, then pay them pocket money of half their mortgage for the next X years until the mortgage is paid off. That way it's their house, you don't have to raise a mortgage or be a landlord and it's something you can sort out easily.

This seems the most practical way forward as it doesn't incur lots of fees and complications over deprivation of asset/CGT/IHT. If you're concerned over getting your money back in case the house is sold to pay care home fees then get an agreement drawn up by a solicitor to formalise this help as a loan and put a charge against the house.

Cheeky_Monkey

Can I just ask OP if you are an only child or do you have siblings who would be entitled to inherit the house as well?