Gifting a mortgaged property?

PF0038

My father wishes to gift me a house (worth approx £900k) which was until recently his primary residence and on which there is a £400k interest only mortgage with the balance due in 2 years. He himself has recently moved into a new (inherited) home.

An accountant has advised that he can gift me the home without capital gains tax implications and I plan to contact a broker to find a suitable mortgage, to repay my father's current mortgage. I intend to live in the home with my family thereafter, either selling or renting out my own home.

My question is fairly straight forward - do I need to repay my father's outstanding mortgage before he can gift me the house debt free? Or, can I arrange for a new mortgage and then use a solicitor to complete the gifting/transaction and repay my father's current mortgage provider, as would be normal if I was buying the house?

With thanks.

HappyMJ

You would be buying the house with a gifted deposit. Some lenders do not accept gifted deposits so talk to a broker.

getmore4less

Buy the house off him for the mortgage amount is likely to be the easiest.


some serious multi generational estate/IHT planning is required.

xylophone

Sell your own property and buy your father's for the value of the mortgage?

It would be a good idea for your father to obtain a professional valuation rather than relying on "values round here"?

Consider IHT implications.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm

http://www.step.org/on

TrickyDicky101

You will be hit with SDLT at 3% on the £400k too - so £12k

MissLaura

If I were you, I would contact an independent financial advisor from a local wealth management company who can look into this and advise you based on your personal circumstances. Something as big as this needs tailored advise, IMO.

Thrugelmir

TrickyDicky101 wrote: »

You will be hit with SDLT at 3% on the £400k too - so £12k

Stamp Duty will be payable on the value of the transaction on a commercial basis as if it was at arms length. Therefore on £900k = £36k. The evasion loop hole was blocked in the 2013 Finance Act.

dimbo61

I think your Dad should sell the property and not have to pay any TAX.
No CGT ( Main residence), NO STAMP DUTY ( he is selling), No INHERITANCE TAX,
OK estate agents fees and selling costs.
Dad can repay the £400K Interest Only mortgage and IF he wants give you some money he can!
Would be a very wise idea to speak to the right people to avoid IHT

Senior_Paper_Monitor

As I far as I recall there was no amendment in the 2013 Finance Act that affected the issue of 'concessionary sale / transaction under market value' in terms of SDLT liability, provided that there were no 'related considerations' and the wording on the relevant HMRC site still reads ...


"If the transfer is exempt or the consideration you give is not chargeable consideration there’s no Stamp Duty to pay and you don't need to tell HM Revenue & Customs (HMRC) about it".


... there are a number of 'general provisions' in the Act but these relate to 'avoidance schemes' but I do not believe these apply to simple 'below value' transactions between family members (indeed we have a couple of these (plus several RTB purchases) going though at the moment and SDLT is applicable on the transaction price).




I do however agree about the need to arrange appropriate financial advice ahead of this transaction - particularly with reference to IHT, CGT and deprivation issues rather than SDLT).

Thrugelmir

"The transfer of rights rules have frequently featured in attempted avoidance of SDLT. The objective of the proposed reform is to make the rules more clearly robust against attempted avoidance while retaining the commercial benefits of the rules. This measure is part of the wider Government programme for tackling SDLT avoidance and making the tax system fairer. "

Selling at under value between related parties is so obviously avoidance.

Dave_Ham

Thrugelmir wrote: »

Stamp Duty will be payable on the value of the transaction on a commercial basis as if it was at arms length. Therefore on £900k = £36k. The evasion loop hole was blocked in the 2013 Finance Act.

This is incorrect, it would be on the lower actual purchase price as suggested above