Help with buying parents house

Jdavies30

Hi,

I am looking for abit of information about buying my parents property, my partner and myself will be first time buyers, my parents have a property they no longer live in and we are looking at buying it.

There is no mortgage on the property and the thought process is that they sign the deeds over to Us with the agreement (legally) we owe them the value of the house and pay them a minimum payment each month.

Has anyone had any experience with this? And what are the consequences of Doing this?

If we sell the house we will pay them the remainder of the loan agreement but I am concerned around inheritance tax as we will be paying them each month are they still "benefiting" from this property. Would this be the case?

Any advice would be greatly appreciated and any one who has experienced a similar situation?

Thanks

G_M

No current mortgage on the property?

You (buyer) not taking out a mortage?

So it's a simple name transfer?

TR1 + AP1 + ID check. See Land Registry here.

You may need advice on SDLT. This is based on the 'consideration' ie the amount paid for the property. It does not just mean cash handed over at the time, but any form of payment.

Whilst a 'gift' would not attract SDLT, it appears your intention is for the transfer to be in the form of a loan based on the property value, so SDLT would be payable on that loan (just as if you took out a 100% mortgage with the bank and paid this in return for the property.

SDLT here

and here

booksurr

1. your parents may have to pay CGT when they transfer ownership to you because you say it is no longer their main home and so is liable for CGT and a transfer counts as a disposal for CGT purposes. How much they would actually pay depends on the numbers...

2. your parents will cease to be the owners of the property but will have a loan agreement between you and them setting out how much you pay them each month. As such it counts as a debt owed to the estate when they die and the outstanding amount would be added back into their estate when totting up its total value. There are ways around that but your parents would need to pay for professional advice to do it properly...

3. they are no longer "benefiting" from the property since they are neither its owners nor getting an income from it. They would simply be receiving the repayments of the loan they advanced to you. Obviously the terms of the loan will need to explicitly state if there is any interest element on top of the capital repayment sum. If interest is charged then parents need to include that it their annual income tax calculation but it has no effect on inheritance tax