Buying House from Parents

danny.mckenzie

Im currently living in my parents house with my Partner, with my parents living in separate houses.

Im looking into the feasibility of buying the property from them.

Market value of the property is circa £360k. The house is currently mortgaged (Interest Only) for £175k.

My parents are looking to distribute the equity between myself, two sisters and take an equal share for themselves so approx £45k each share.

Had a look at the basic mortgage calculators and i believe i could borrow upto 315k on mine and my partners salary. With my 45k share and savings of 20k that should enable me to take a mortgage.

However im not sure on the best way forward. Could the house be sold to us for under its market value (say 300k) and we get a mortgage that does not require a deposit?

If we need to put the deposit down what is the best way of my parents giving the 45k share?

Any pointers on the above situation would be appreciated!

Thanks

ThePants999

100% mortgage - no. But while IANAL, it feels to me that there must be some way that you could have a transaction at market value but your parents agree to gift you £45K, that £45K coming out of the sale price rather than being an actual funds transfer. Then your £315K mortgage is <90%. Chat to a solicitor.

getmore4less

Have they worked out the CGT?

danny.mckenzie

Dont think CGT will be an issue as the house is in my dads name. He lives with his partner (Her house being in her name).

So best advice would be to consult a solicitor?

Thanks

Mojisola

danny.mckenzie wrote: »

Im currently living in my parents house with my Partner, with my parents living in separate houses.

danny.mckenzie wrote: »

Dont think CGT will be an issue as the house is in my dads name. He lives with his partner (Her house being in her name).

As your Dad doesn't live in the house, he may be liable to pay CGT when the house is sold - it depends on how much the house has increased in value between the time he last lived in it and the time of sale.

amyg

I'm in the process of doing something similar. It was previously called a gifted deposit. Can't remember the correct terminology now. The simple answer is not very many lenders will do this, they want an actual deposit. Although I've found 2/3 that will. Mortgage broker could be helpful in finding the most suitable for you?

audigex

You can definitely sell at under market value. I bought my home like this. The important thing (usually) isn't your "deposit" amount, the important thing is the Loan-to-Value ratio.

The mortgage company never sees the deposit, they don't care about it: as far as they're concerned you're buying a house and borrowing part of the money from them. Whether the rest is being gifted or comes from your bank is mostly irrelevant. The only thing the lender needs in a normal "buy a house off your parents" scenario is typically a written guarantee from your parents that they won't live there after the sale, and some insurance which covers any potential future claims that your parents have any equity left in the home or that the gifted deposit could form part of their estate if they die and it becomes subject to inheritance tax. In my case that was around £100, but I presume it depends on the size of the gift.

What they do care about, however, is that your parents and other family members will have an interest in the home: particularly if your parents continue to live there! This could make it very difficult/impossible for them to repossess the home and will massively limit your options.