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Parents to buy a house & sell to us cheap. Advisable?
Taucher
Posts: 79 Forumite
Hello all,
So my parents are happy to help my wife and I buy a house and have said that they can give us £50,000, maybe £60, 000. They are lovely.
My wife is pregnant and we have been advised not to apply for a mortgage until her maternity period is up and she is back at work, which will be May 2016.
Instead of gifting us the money in cash, my dear old Dad is thinking that he could buy a property now for £200, 000 (as an easy example) and sell it to us in May 2016 for £150, 000. OR buy a house that needs renovation for £170, 000, do it up and then sell it to us for £170 ,000.
Is this idea workable? I BELIEVE that mortgage lenders would accept this from my limited research but I might be wrong. The difference in house valuation to the sale price would effectively be our deposit. Am I correct in thinking this?
ALSO, I have read that Capital Gains Tax might be payable on a deal of this kind but I am not sure how that would be calculated and if it would render the idea unviable.
Any thoughts and advice would be gratefully received.
T
So my parents are happy to help my wife and I buy a house and have said that they can give us £50,000, maybe £60, 000. They are lovely.
My wife is pregnant and we have been advised not to apply for a mortgage until her maternity period is up and she is back at work, which will be May 2016.
Instead of gifting us the money in cash, my dear old Dad is thinking that he could buy a property now for £200, 000 (as an easy example) and sell it to us in May 2016 for £150, 000. OR buy a house that needs renovation for £170, 000, do it up and then sell it to us for £170 ,000.
Is this idea workable? I BELIEVE that mortgage lenders would accept this from my limited research but I might be wrong. The difference in house valuation to the sale price would effectively be our deposit. Am I correct in thinking this?
ALSO, I have read that Capital Gains Tax might be payable on a deal of this kind but I am not sure how that would be calculated and if it would render the idea unviable.
Any thoughts and advice would be gratefully received.
T
0
Comments
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Double Stamp Duty (ON the real value if HMRC find out its sold at less of a price)
Double Legal Fees
Capital gains on any increase in value
You can apply for a mortgage while your wife is on maternity. Find a good Mortgage Broker they will advise you. You just tend to need a letter from your wife's employer confirming that she is going back and salary etc.0 -
It's obviously possible to do but from a tax perspective it may not give a great outcome.
You'll have two lots of stamp duty to pay (£1,500 on a £200k property sale each time).
For your parents, then they could suffer capital gains tax as the proceeds will be based on market value at the time of sale to you rather than the actual price paid as you are connected. Fine if there isn't a gain, or they have no other capital gains and can therefore use their annual exemptions, but a possible tax impact to them without any cash if the gain is over £20k on the value of the property.0
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