Transferring ownership of property to a family member

London_57

Hi all,

I've seen some similar posts and I'm slightly lost and need some direction.

I'm living in a house owned by a family member and I'm paying them rent for the property. There is a mortgage.

They are now looking to transfer the property into my name, along with the mortgage. Previously the verbal agreement was that they'd buy the property and when i am able to, i would 'buy them out'. Much has changed and now they do not want anything in return, they are happy to switch the names.

I'm able to pay the mortgage but concerned about the stamp duty/fees. We've agreed that we're looking for the most cost efficient way to proceed.

What's the best way? Gifting seems like the best way however the IHT is an issue. Also, this is their second property so i assume CGT would play a part (possibly).

Thanks!

HappyMJ

London_57 wrote: »

Hi all,

I've seen some similar posts and I'm slightly lost and need some direction.

I'm living in a house owned by a family member and I'm paying them rent for the property. There is a mortgage.

They are now looking to transfer the property into my name, along with the mortgage. Previously the verbal agreement was that they'd buy the property and when i am able to, i would 'buy them out'. Much has changed and now they do not want anything in return, they are happy to switch the names.

I'm able to pay the mortgage but concerned about the stamp duty/fees. We've agreed that we're looking for the most cost efficient way to proceed.

What's the best way? Gifting seems like the best way however the IHT is an issue. Also, this is their second property so i assume CGT would play a part (possibly).

Thanks!

They will have to sell you the property for no less than the amount outstanding on the mortgage so it can be redeemed. You will need to pay the asking price. If you don't have enough money you will have to raise a mortgage on the purchase price. If the property is worth £100,000 but you pay £50,000 which would be enough to clear the mortgage you will only be able to borrow 80% (maybe more depending on lender) of £50,000. You will still need to find £10,000 yourself.

If you don't have the £10,000 then you'll need to find a lender willing to accept a vendor gifted deposit so you can borrow the full amount against the true value of the property. There's not many of those mortgages and they might only accept a small vendor gifted deposit such as 5% of the value of the property. 5% of £100,000 would only be £5,000 so you'll still need to find another £5,000.

MrJB

No avoiding the SDLT/Fees really - you may be able to save yourself some conveyancing fees by doing the transfer yourself, although the lender may not be happy about this!

We cannot answer the question on CGT without more information - how much was the house purchased for/when/how much is it worth now/was it ever occupied by the owner etc.

London_57

HappyMJ wrote: »

They will have to sell you the property for no less than the amount outstanding on the mortgage so it can be redeemed. You will need to pay the asking price. If you don't have enough money you will have to raise a mortgage on the purchase price. If the property is worth £100,000 but you pay £50,000 which would be enough to clear the mortgage you will only be able to borrow 80% (maybe more depending on lender) of £50,000. You will still need to find £10,000 yourself.

If you don't have the £10,000 then you'll need to find a lender willing to accept a vendor gifted deposit so you can borrow the full amount against the true value of the property. There's not many of those mortgages and they might only accept a small vendor gifted deposit such as 5% of the value of the property. 5% of £100,000 would only be £5,000 so you'll still need to find another £5,000.

What dictates how much I'm able to borrow (i.e. how did you calculate borrowing 80%).

Is it easier to get a mortgage approval from the bank for the value of the property and use the Gvt's help to buy scheme (5% personal / 5% Gvt contribution)? To confirm I'm a first time buyer. I know the remaining mortgage is 220, therefore, i can raise the 5% and get a mortgage on the remainder.

AdrianC

They cannot "transfer the mortgage".
They would need to repay their mortgage - presumably by you taking out a mortgage on your own, and passing the money to them to repay theirs.

This is generally known as a "sale"... The fact you're family members isn't massively relevant. SDLT would be due on the money paid over.

vuvuzela

London_57 wrote: »

What dictates how much I'm able to borrow (i.e. how did you calculate borrowing 80%).

Is it easier to get a mortgage approval from the bank for the value of the property and use the Gvt's help to buy scheme (5% personal / 5% Gvt contribution)? To confirm I'm a first time buyer. I know the remaining mortgage is 220, therefore, i can raise the 5% and get a mortgage on the remainder.

What sort of salary are you on and what is the value of the property ? Your family member will have to sell the property and you will need to tak out a mortgage to buy it, unfortunately mortgages can't just be transferred to people. You'll likely need to be earning over £50,000 to be able to afford a mortgage of this size.

Lunchbox

London_57 wrote: »

What dictates how much I'm able to borrow (i.e. how did you calculate borrowing 80%).

Is it easier to get a mortgage approval from the bank for the value of the property and use the Gvt's help to buy scheme (5% personal / 5% Gvt contribution)? To confirm I'm a first time buyer. I know the remaining mortgage is 220, therefore, i can raise the 5% and get a mortgage on the remainder.

Help to buy is only available on new build properties. Vuvuzela is correct - you'd need to be earning at least £50k for this mortgage, potentially more if you have other committed outgoings or loans.

kinger101

Even if you could transfer the mortgage (which you can't) then the transfer of debt for property would be still be consideration for SDLT purposes.

Regardless of the amount you pay for the property, for CGT purpose, the disposal will be deemed to occur at open market value. It may also be a potentially exempt transfer for IHT purposes. If IHT is due on the estate, and no provision has been made in the will, HMRC can chase the recipient of the gift for the tax.

Family members buying property on the behalf of relatives isn't very tax effective I'm afraid. I hope the family member receiving rent has fulfilled any obligations they have for paying income tax.