Selling a house for cost

kdb550

I bought a house 10 years ago, the house value as increased by approx 80k since. I am about to retire and will no longer be able to afford the mortgage.

I want to sell this house to my daughter for what I paid for it and I will use the money from this to pay off the mortgage. I will then continue to live in the house and pay my daughter rent.

please can anyone tell me the pitfalls or tax implications of this.

Pixie5740

How is your daughter going to pay for your house? Cash or will she need a mortgage? If the latter then she could be looking at a regulated BTL mortgage.

Your daughter will be your landlord with all the legal responsibilities that go along with that. The rent you pay her will be subject to income tax. Assuming your daughter doesn't live with you then Capital Gains Tax will be due when she eventually sells your home. As you will continue to live in the property then the £80k you gift her will be subject to Inheritance Tax (may or may not be an issue depending on the size of your estate when you pass). Depending on whether or not this is the only property your daughter own or will ever own there could be the issue of the additional 3% SDLT. In other words you could potentially be setting your daughter and your estate up for a quadruple tax whammy.

Should you need residential care in the future you will be considered to have deliberately deprived yourself of assets so the council could still put a charge on the property anyway.

If you fall out with your daughter, she gets married and then divorced you could find yourself homeless.

Have you spoken to a mortgage broker to discuss your options?

kdb550

Her mortgage will be paid off in the next 3 years, so she would then be getting another mortgage to purchase my house from me.

If I ever do need to go into care then my daughter has space at her house for me and one of her sons would probably move into this house when they are old enough, so there would be no plans to sell the house as it would be for her boys to live in.

Pixie5740

kdb550 wrote: »

Her mortgage will be paid off in the next 3 years, so she would then be getting another mortgage to purchase my house from me.

Ok so your daughter will need a regulated BTL mortgage as she will be letting to family or possibly a second home mortgage depending on the lender. Your daughter will have to pay the additional 3% SDLT.

kdb550 wrote: »

If I ever do need to go into care then my daughter has space at her house for me and one of her sons would probably move into this house when they are old enough, so there would be no plans to sell the house as it would be for her boys to live in.

The best-laid schemes o' mice an' men
Gang aft agley

kdb550

Pixie5740 wrote: »

Ok so your daughter will need a regulated BTL mortgage as she will be letting to family or possibly a second home mortgage depending on the lender. Your daughter will have to pay the additional 3% SDLT.



The best-laid schemes o' mice an' men
Gang aft agley

I know what you mean but they all ready have a granny annexe

gettingtheresometime

kdb550 wrote: »

I know what you mean but they all ready have a granny annexe

And 24 hours is a long time in politics......


Seriously there are so many pitfalls with this plan that if it were a road the council would be getting compensation claims left right and centre.


An example what happens to the granny annex if she divorces? Or has to move ?

Pixie5740

kdb550 wrote: »

I know what you mean but they all ready have a granny annexe

What about the tax issues and deprivation of assets (because the granny annexe might not suit your needs in the future)?

I'm not saying it can't be done but it is not something you want to attempt to DIY. Take professional advice.

kdb550

gettingtheresometime wrote: »

And 24 hours is a long time in politics......


Seriously there are so many pitfalls with this plan that if it were a road the council would be getting compensation claims left right and centre.


An example what happens to the granny annex if she divorces? Or has to move ?

Thanks for the response but I like to think positively about these things and was only interested in the legal and tax side of things rather than worry about the what ifs. If I thought like that what would be the point of getting up in the morning.

NYM

Excuse me for asking a fairly personal question regarding finances, but if you're contemplating selling because you can't afford your mortgage, how will you be able to afford the rent your daughter would need to charge?

gettingtheresometime

kdb550 wrote: »

Thanks for the response but I like to think positively about these things and was only interested in the legal and tax side of things rather than worry about the what ifs. If I thought like that what would be the point of getting up in the morning.

My mum was asked by my sister to go and live nearer her, in a house that my SIL & BIL would own - so effectively do what you are proposing.


She turned their offer down for the very reasons that have been mentioned on this thread.


She still finds reasons to get up in the morning though

teddysmum

Many people are determined to care for a loved one at home, but sometimes this is just not possible and even the most determined cannot cope. For example, some people with dementia can become very violent or too difficult to manage due to stress. Also, would a member of your family be willing to give up work to look after you , as just Attendance Allowance would not cover much bought in care?


As has been said, selling at £80000 below value would be deemed as deprivation of assets. The LA would probably provide care, then charge your daughter (via the house and charging high interest rates), as she benefited from the deprivation .


Some have mentioned the fact that, should someone dispose of assets and need care, the Human Rights Act would not allow them to be neglected , but there has been no published information about such a scenario and in your case, the asset is still available to repossess. (I vaguely remember my sister mentioning that a work colleague was given her aunt's house, but when the aunt went into care, she had to give it back or pay the bills.)


Perhaps it would be better to sell to someone else, at full market value and move into smaller or sheltered accommodation. Perhaps, you could sell to a BTL landlord, who would let to you, but you would lose the security of staying put, in this case.