Second mortgage advice

Johnrob

Hi all, I was hoping to get some advice from anyone in the know about mortgages. Apologies if this is a little long winded!

My mum wants to sell her house and move to a new property. When she sells her existing property and pays off the remainder of her mortgage she will have around 120k. The houses she wants to buy are 150k ish. As she cannot afford this we have discussed her giving me the 120k to use as a deposit, and me taking out a small mortgage to cover the remainder. I have a loan that I would pay off with proceeds of the sale of her house. My first question is if she sold the house and I paid off my loan how quickly would mortgage providers take this into account? As I know the loan would go against me in affordability checks. My second question is would I be liable to pay any tax on the money that she is giving me to use as a deposit.

Any advice would be much appreciated. Cheers

Beckyy

Why not by it in joint names? Many lenders have restrictions on gifted deposits, some will only allow so much to be gifted and would require evidence that it is a gift, not a loan. I can't comment on the tax side of things. How big is your loan?

Johnrob

My loan is 14k. We didn't want to do it in joint names as my mum is 62 and has quite a complex medical history. I wanted to do the new mortgage over 25 - 30 years, and I didn't think the mortgage providers would let my mum take out a mortgage at her age (apologies if I'm being very ageist!). If I'm wrong then this could definitely be an option.

termhero

I believe you can give £3000 a year without paying tax, £6000 if you didn't give the previous year.

lucie_1985

The gift would be a potentially exempt transfer (PET) for IHT purposes and no tax would be payable at the point of making the gift. The potentially taxable amount would be £120k less the current year allowance of £3k and the prior year £3k - of she hasn't used these already, so a net amount of £114k.


Tax would only become payable on death and the amount that would be taxable would reduce proportionally to nil if 7 years have elapsed from the date of the gift to the date of death.


However it seems to be a moot point given the £325k IHT threshold unless she has another £200k in her estate

lucie_1985

On the other hand, you would probably fall in the pre owned asset tax regime which is worth taking a look at. http://www.just-tax.co.uk/tax_factsheet_capital_taxes_6.htm See example 3.