Undersold house

HaydenB

Morning,

My parents are downsizing and are looking to sell their current house to me. It has been valued at £150k and they are wanting to sell it to me for around £125k, releasing some of my inheritance. As the house needs a lot of work doing on it we are looking to get a mortgage for around £135k which will give us £10k to spend on the house along with the £10k savings we have. First of all would that be feasible? And would will still have to pay stamp duty?

stephenni1971

If they sell it to you for £125k where does the deposit come from?

HaydenB

Am I incorrect in thinking that no deposit is required due to its loan to value? i.e. If they sell it to me for 125K its around 83% of its value?

stephenni1971

Yes so the 25k reduction in price is your deposit. So where do you take the £10k for improvements from?

HaydenB

As I asked in my first post, could we not get a mortgage for £135k. £125k to buy from the parents, in effect putting a £15k deposit down and releasing early £10k equity to spend on the house?

kingstreet

No. Lenders lend based on the lower of purchase price or value so you can't borrow more than what you are paying for the property even when you are purchasing from relatives via what's known as a concessionary purchase.

HaydenB

OK, thanks.

pjcox2005

I don't know if it's possible but could you buy for £135k from parents so mortgage approved assuming you meet lending criteria. Someone else can confirm if the lender would have an issue/know.


Stamp duty would be due on consideration so for £135k it would be £200


Parents then gift you the £10k which would have an inheritance tax risk if they die within 7 years, but no other implications.

StuC75

Do you have the required deposit to buy the house?

In theory if you had the deposit to buy the house at £150k, there would be nothing to stop your parents then giving you £25k or whatever amount once you had actually completed on buying the house.

That would be dependent on the mortgage valuation coming in at £150k, as although there has been an estate agents valuation at £150k, who's to say it would fetch that on the open market?

How strong is the market in that area? would it actually sell at 150k? if not you could find yourself getting into negative equity (135k mortgage) should there be any movement, meaning that any perceived 'inheritance release' to you is wiped out..

If you are buying with a partner (notice you say 'we are looking') how do they feel about buying your parents house? would the parents ever detach themselves about if being there place? What If you split up how would that equity be handled?

The less emotive method would be parents sell at market price, then give you £25k to put as a deposit on another house - clear of any history \ emotional attachment from parents, and clear to handle how the deposit was provided\protected..