Buying house with parent

progamer

Hello all,

My parents and I have lived in a private rented property now for the past 20 years and the current vendors have asked if we would like to purchase the property. I have discussed this with my parents for some time and we have decided to go ahead and do it because we've been offered a good price from the vendor (we have a property valuer in the family) and have seen the prices sell on our road for much more than he is offering it to us for.

Now, we have both decided to put down enough money to cover half of the property value (needing a 50% LTV mortgage). My only concern is that, if in 10 years when the mortgage is paid off and I decide to move out into my own house (I know plans change, but just hypothetically speaking) would I then have to declare anything else other than "I now live in this new house" to the government? What would happen to the property I've paid half of when my parents pass away?

For example. Would there be any inheritance tax to pay? Would I have to charge rent to my parents as I own half of the property? Would I have to pay capital gains tax on rent?

Thanks in advance, I hope my question makes sense.

booksurr

if you have a "valuer" in the family I am horrified at the naivety of your questions and the fact you turn to the internet for answers instead of asking them how the world of home owning works

1. you and your parents will continue living in the property so it will be your "main home" for both of you

2. Will the mortgage will be in both your and your parents names? Whilst you say the mortgage will be for only 50% of the value can your parents or you pass the affordability test for that sum of money alone? You do understand that mortgages are "joint and several liability", that means any one party to the loan must be able to cover the whole loan by themselves in case the other person defaults on it. There is never a my share and their share in the eyes of the lender. Obviously if you have already got a mortgage lined up ("mortgage in principle") then these questions are irrelevant.

3. You are "young"? You will move out at a date in the future and launch your own life. It is improbable that launch will be tied to the date the mortgage is paid off.

4. When you buy a place of your own you would be classed as an existing home owner and so.....
- ineligible for first time buyer offers
- have to pay the higher rate Stamp Duty Land Tax on your "new" home as it would be an "additional" property you own
- you (not your parents) would become liable to pay CGT on YOUR share of the GAIN in value of your "parents" property between the date you moved out (technically the date it ceased to be your "main home") and the date it sold.

4. No you do not have to charge your parents rent on your share of the property you both own. Even considering to do so is morally dubious. You do not pay CGT on rent. rent is an income not aq capital gain. If you did (morally reprehensible) charge your parents rent for occupying the building after you left then that is an income for you, and you would have to declare it against your own income tax position

5. Depending on whether you and they own the property as "Joint Tenants" or as "Tenants in Common" (google those meanings) you will inherit their 50% of the property (assuming it is not TIC and they did not leave it in their will to, for example, an animal welfare charity). You already own 50% of it yourself. If their total estate (including their 50%) is above the inheritance tax threshold (currently £650,000) at the date of the death of second person to die they their estate would have to pay IHT. Unless your parents are considerably richer than your info implies then it is improbable IHT will be an issue for them. it will never be an issue for you as you don't pay it, they do.

mrginge

What type of tenancy do you have?

progamer

booksurr wrote: »

if you have a "valuer" in the family I am horrified at the naivety of your questions and the fact you turn to the internet for answers instead of asking them how the world of home owning works

1. you and your parents will continue living in the property so it will be your "main home" for both of you

2. Will the mortgage will be in both your and your parents names? Whilst you say the mortgage will be for only 50% of the value can your parents or you pass the affordability test for that sum of money alone? You do understand that mortgages are "joint and several liability", that means any one party to the loan must be able to cover the whole loan by themselves in case the other person defaults on it. There is never a my share and their share in the eyes of the lender. Obviously if you have already got a mortgage lined up ("mortgage in principle") then these questions are irrelevant.

3. You are "young"? You will move out at a date in the future and launch your own life. It is improbable that launch will be tied to the date the mortgage is paid off.

4. When you buy a place of your own you would be classed as an existing home owner and so.....
- ineligible for first time buyer offers
- have to pay the higher rate Stamp Duty Land Tax on your "new" home as it would be an "additional" property you own
- you (not your parents) would become liable to pay CGT on YOUR share of the GAIN in value of your "parents" property between the date you moved out (technically the date it ceased to be your "main home") and the date it sold.

4. No you do not have to charge your parents rent on your share of the property you both own. Even considering to do so is morally dubious. You do not pay CGT on rent. rent is an income not aq capital gain. If you did (morally reprehensible) charge your parents rent for occupying the building after you left then that is an income for you, and you would have to declare it against your own income tax position

5. Depending on whether you and they own the property as "Joint Tenants" or as "Tenants in Common" (google those meanings) you will inherit their 50% of the property (assuming it is not TIC and they did not leave it in their will to, for example, an animal welfare charity). You already own 50% of it yourself. If their total estate (including their 50%) is above the inheritance tax threshold (currently £650,000) at the date of the death of second person to die they their estate would have to pay IHT. Unless your parents are considerably richer than your info implies then it is improbable IHT will be an issue for them. it will never be an issue for you as you don't pay it, they do.

Thank you for your in depth reply, I should have known some sarcasm would be added due to the fact you love a forum.

Whistler23

Oh snap!

Great response though.

[Deleted User]

Hmm another new poster that doesn't realise this is an open forum and likes to bite the hand that feeds it.

Try asking your family advisor who is an expert in these matters.

Whistler23

There are a lot of posts/users that give reason for new members to bite said hand...

Albeit excellent advice (in most cases).

Thrugelmir

Whistler23 wrote: »

There are a lot of posts/users that give reason for new members to bite said hand...

Albeit excellent advice (in most cases).

If only the real world was warm, friendly and cuddly. Not full of rules and regulations, tax laws etc that need to be considered.