First time buyer

mhuk01

Hello

I am a first time buyer looking to purchase a flat for around £110,000. Due to working overseas it is very difficult for me to get a mortgage. Therefore I am looking at doing the following: -

£25,000 deposit (funded by myself)
£25,000 gift from relatives
£60,000 as a loan from my parents (ie to be paid back in installments, just like a mortgage).

Does anyone know if there are any pitfalls to this? What are the tax implications, if any? Is it just a case of them transferring the money to me?

Any advice would be much appreciated.

eddddy

There's all the usual "family feud" risks - which I guess you have thought about. e.g. if you become unwilling or unable to pay back the installments, or you decide to sell it and not give the money back.

If your parents are charging you interest, the interest is taxable income to them.

If the flat will be your principle private residence there will be no Capital Gains Tax liabiity.

If it will not be your principle private residence (e.g. you rent it out), you will have to pay CGT when you sell.

If you were getting a mortgage, the bank would ensure the flat is mortgageable, and their valuer would do a cursory check of the flat to confirm it's value.

As you're not getting a mortgage, you should probably get a survey to confirm its value, and make sure that it is mortgagable for the person you eventually sell to.

mhuk01

eddddy wrote: »

There's all the usual "family feud" risks - which I guess you have thought about. e.g. if you become unwilling or unable to pay back the installments, or you decide to sell it and not give the money back.

If your parents are charging you interest, the interest is taxable income to them.

If the flat will be your principle private residence there will be no Capital Gains Tax liabiity.

If it will not be your principle private residence (e.g. you rent it out), you will have to pay CGT when you sell.

If you were getting a mortgage, the bank would ensure the flat is mortgageable, and their valuer would do a cursory check of the flat to confirm it's value.

As you're not getting a mortgage, you should probably get a survey to confirm its value, and make sure that it is mortgagable for the person you eventually sell to.

Thanks for the quick response.

In answer to your questions: -

Yes the loan from family is with interest. Does this mean there are no inheritance tax issues? Does a contract have to be drawn up to prove how much of my repayments to them are interest, and therefore taxable?

I am also getting a £25,000 'gift' from other family, how does this differ regarding tax implications? Does it mean this has inheritance tax eventually applied?

At first I would be renting the property out, however eventually it would become my main residence. Is CGT only if I am renting the property before selling?

I understand the importance of getting a full survey on the property done for reselling at a later date.

mhuk01

bump........

mhuk01

anyone got any other thoughts on this?

Out,_Vile_Jelly

Speak to a mortgage broker and a financial adviser?

mhuk01

Out,_Vile_Jelly wrote: »

Speak to a mortgage broker and a financial adviser?

I understand the need to do that, however I see no harm in asking some of you kind folk for friendly advice. These forums are great for that kind of thing