Parent splitting there house and selling part to me

simmo83

Hi, This is a bit complicated but here goes..My parents have a large INTREST only mortgage on a large 6 bed property, They will never be able to pay the mortage off when it finishes in 12 years. They love where they live and we have an idea to split the house into two houses which I will buy from them and live next door. Subject to planning.
A few question I have,
1. Will I have to pay stamp duty?(I'm not a FTB)
2. Do they need to pay CGT?
I think the answer to the above is yes but is there anyway to get round this?
Any advise is welcome but I understand I probably need to see a solicitor.

Propertyauthor

You need to chat to three professionals and it might be better to speak to the planner first as it shouldn't cost you anything to get an initial view.

Speak to the planners to see if they would be happy for you to do this.

On the legal company, ideally you want one who is a STEP lawyer (step.org) has experience of dealing with trust and estates and secondly a property tax expert, who the STEP lawyer is likely to work with. It is likely the answers will be very specific to yours and your parents circumstances, so these are the professionals I would approach in your situation.

Hope that gets you started.

dimbo61

The HUGE problem to this idea will be the mortgage lender !
They will refuse the splitting of the property while your parents still have a mortgage.
The costs of splitting the property in two and utilities, land registry may mean this will not work

TrickyDicky101

What are the amounts in question here (ie parents' current mortgage, price you would pay for your property, and whether you would need a mortgage yourself)?

agrinnall

Why won't your parents be able to pay off the mortgage? It seems unlikely that any lender would have provided an interest only mortgage on the property that the borrowers lived in without a repayment vessel being in place.

Gwhiz

agrinnall wrote: »

Why won't your parents be able to pay off the mortgage? It seems unlikely that any lender would have provided an interest only mortgage on the property that the borrowers lived in without a repayment vessel being in place.

Back in the day, very possible and very likely.

Or else an old endowment mortgage where endowment performance has been bad (like most of them).

BigAunty

Are you sure you want to be sucked into their financial problems and be their immediate neighbour? On this forum, we often see families mixing business into their relationships and experiencing spectacular fall-outs when property/money issues arise.

People who can't afford their properties have all sorts of options rather than dragging other family members into their financial commitments. They can sell up and downsize, for example, move into rented accommodation, make changes to their mortgage and so on.

Is there really no prospect of them paying off their mortgage in the remaining 12 year term or taking other action to prevent it's repossession in the long term?!

LittleMissGiggles123

dimbo61 wrote: »

The HUGE problem to this idea will be the mortgage lender !
They will refuse the splitting of the property while your parents still have a mortgage.
The costs of splitting the property in two and utilities, land registry may mean this will not work

Exactly what I thought when I first read this. The mortgage company probably wouldn't allow it because the house they have lent the money on is being split in half, so would most probably decrease in value.


Also, where will your parents get the money to be able to fund this? You would only be able to get a mortgage once the work is complete.


If they have the money to fund the build, they should use that money to start paying off the mortgage.

bris

It is of course possible planning permitting.

The downside is each half will need to have their own kitchen, bathroom and main entrance. This could mean losing a bedroom or 2 in one or both half's.

The bank would need to either come to a new arrangement that will see half the mortgage paid leaving the other half with enough equity to cover a decent deposit on a new deal. This would however be repayment as interest only is now very hard to get.

Or they will refuse meaning a new lender would have to be found to cover both loans as well as the renovation costs.

xylophone

Is it the area that your parents like? Is there no smaller property available?

Would it not be easier for them to sell the whole house to you, repay the lender and buy a small property outright?

That way the property stays in the family - your parents could always have long visits with you if required?

booksurr

simmo83 wrote: »

Hi, This is a bit complicated but here goes..My parents have a large INTREST only mortgage on a large 6 bed property, They will never be able to pay the mortage off when it finishes in 12 years. They love where they live and we have an idea to split the house into two houses which I will buy from them and live next door. Subject to planning.
A few question I have,
1. Will I have to pay stamp duty?(I'm not a FTB)
2. Do they need to pay CGT?
I think the answer to the above is yes but is there anyway to get round this?
Any advise is welcome but I understand I probably need to see a solicitor.

you need to post your question on the cutting tax board as there are several ex HMRC people on there who can advise re CGT - my guess is it would be liable to CGT

you will certainly have to pay SDLT if you pay more than £125k, if you don't, you won't