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Buying parents house
Comments
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Not an option to remortgage my house...its jointly owned with my partner and I'd need to remortgage 100% of the valueYes, it is possible.
You'd need to talk to a mortgage broker about whether to get aBTL mortgage on your parents home (might be tricky if you were then going to rent to your parents) or whether you could remortgage your own house and find the purchase that way.
This should be OK...the boiler is new and its been rewired in the last few years so shouldn't have any issues passing....its got smoke alarms etc already in placeYou would need to comply with all rukles for landlords (gas safety certificates, ID checks etc)
I won't make anywhere near 11k, but didn't;t want to have to pay tax if I made a little bit as this could cover costs...If the property is worth more when you sell it than when you buy, you will have a potential CGT liability, but that only kicks in if you make a profit, and you do have an annual allowance of about £11K. Also, if you are not trying to make a profit then why worry abouit the fact that if you happen to do so, part of that windfall will go in tax?.
We've done this and all the valuations are within a £10k window - £120k->£130kDepreivation of assets should not be a problem if you pay market value for the property, although it might be sensible for your paretns to get several market appraisals done so there there is some evidence of the value before the transfer takes place, in case it is ever raised as an issue.
Yes we would do this...And do make sure that you have a proper tenancy agreement etc in place. It does not sound as though you are likely to fall out with your parents but making sure that all the papework is in order protects you both, particualrly in the event of any unexpected developments .
Really? if it only covers the mortgage? I also thought you could have one BTL property without paying tax...but no idea why I think that?You would laso have to declare the rent as income and pay income tax on it.
They have to buy at least 50% of the place they are going into and need the equity in the house to afford this....I don't have £120k in savings to lend them so would need to borrow it somehow,,,IS the requirement that they do not own a property, or simply that they have £xx is casdh in the bank? If it is the latter, then a simpler option would be for you to lend them then necessary amount, have the loan secured by a charge over their property and have a legal charge setting out the corcumstances in which it is to be repaid. You can agree with your paretns whether this is as a % of the value of the house, for a fixed sum, and whether / how you account for interest.
Thank you for such a detailed reply...its been really helpful...I thought my solution was quite simple but it appears its fraught with traps lol...
I need to do something tho as I can't handle the stress of moving them twice...never mind them having to handle it too,,0 -
Its been valued at £120k->£130k...so I'd buy it at below £125k to avoid it....well I thought thats where it came in?!
That would be the threshold if you didn't own any other residential properties. However, you do own a residential property and when you buy your parents home you will own two residential properties. Therefore, you will need to pay the SDLT surcharge for buying an additional residential property. On a purchase price of £125k that leaves you with a £3,750 SDLT bill.
The only way to avoid SDLT would be to purchase your parents home for less than £40k but then you'll be hit with CGT when you sell.0 -
Maybe your parents should sit down with a mortgage broker to see if there's any way they can raise the required money from their home through bridging finance (not sure if that will even be an option) or equity release or some other means.
Are they not able to form a chain to simultaneously sell the current home and purchase the new home? Any property will sell at the right price.0 -
Really? if it only covers the mortgage? I also thought you could have one BTL property without paying tax...but no idea why I think that?
Not only will you have to do a tax return and declare your rental income, as you already own a house, you'll have to pay 3% on the purchase price when you buy it (0% stamp duty below £125k if it's your only house, but it will be 3% if you already have a property).0 -
Really? if it only covers the mortgage? I also thought you could have one BTL property without paying tax...but no idea why I think that?
Yes, really. And only the interest part of the mortgage can be used to offset against the rent received. Which is why most Landlords have interest-only BTL mortgages.
You don't say if you also work, but if you do, your job will probably be using up your personal allowance so you will pay tax on 100% of your profit.
You really need to sit down and work out what this will actually cost you. As you've already been advised, you will pay stamp duty and you will have to do a Self Assessment Tax return every year, but that doesn't mean that you shouldn't do this. You just need to go into it with your eyes wide open so you're not caught out by an unexpected expense.0 -
Sorry its been so long updating this....its a bit of minefield this BTL thingy!
I have come to understand I can only have a regulated buy-to-let, no normal BTL lender will allow you to rent to family, especially if they are considered sitting tenants...so searching for one of these has been really tricky....in fact I still haven't found one...I have found 2 lenders that do "family BTL" but aren't too happy about the sitting tenant thing...
Equity release doesn't work for the folks as they need 100% of the value releasing...can't find anywhere prepared to do that...
So I am resigned to having a more expensive mortgage whilst parent are still living there - I will also need to have a min 30% deposit but thats OK...I have that...I will need to pay SDLT at 3% and the arrangement feed on these types of mortgages are higher...but even after all that the rent will be enough to satisfy 145% of the interest only monthly amount...so we are still looking for that elusive "regulated/family BTL" that allows sitting tenants....
My parent will sign any legal document they need to to reassure lender and solicitor they will move once a flat is available in the retirement village - they are desperate to get there...the house is a bit much for them now,,,,
I am a bit perplexed why mortgage lenders see renting to family more risky than to strangers...its also weird because I can cover the mortgage even if I don't have tenants...so I don't need any rent and still won't default on the loan...
Anyone got any ideas where else does these types of mortgages?0 -
Coming to this a bit late, but I find it hard to believe that everyone buying a house in this retirement village pays cash. I would have thought that most people would have to sell their house to finance it.
Retirement villages surely must be more flexible than they have told you or they would struggle to sell their homes.0 -
Coming to this a bit late, but I find it hard to believe that everyone buying a house in this retirement village pays cash. I would have thought that most people would have to sell their house to finance it.
Retirement villages surely must be more flexible than they have told you or they would struggle to sell their homes.
I'm puzzled by this too and would go back to them to find out what normally happens with their sales.
I'd also check that the retirement village is suitable for them if they're starting to struggle; they may well have to move again soon (care home) if their health is declining.They are an EYESORES!!!!0 -
because the landlord is less likely to evict for non payment so "will" get into mortgage arrears more easily, the tenant is more likely to take payment holidays because "it's in the family", repossession by the lender is more expensive where the tenant may have a prior ownership of the property because their rights to counter claim need to be addressedI am a bit perplexed why mortgage lenders see renting to family more risky than to strangers...
well see the Virgin Money advert below then...its also weird because I can cover the mortgage even if I don't have tenants...so I don't need any rent and still won't default on the loan...
so where have you looked so far? Have you dealt with a broker (I find it unlikely a broker cannot get one for you)Anyone got any ideas where else does these types of mortgages?
googling regulated buy to let mortgage lenders brings up a list of such. As you now know there are fewer of them than a "normal" BTL, but they are there
http://lmgtfy.com/?q=regulated+buy+to+let+mortgage+lenders
not that i am recommending them, but bearing in mind what you said above I note this:
https://intermediaries.virginmoney.com/virgin/lending-policy/find-articles-a-z/index.jsp?range=kn
Letting to a Family Member (Regulated Buy to Let)
Although Buy to Let mortgages are not regulated, scenarios where the tenant of the property is the customer's immediate family (e.g. parent, grandparent, child, grandchild, brother, sister) are regarded as regulated loans therefore they must proceed on a standard residential product.
The following restrictions must be met:
- Maximum LTV 75%
- Affordability will be assessed as per residential lending policy. The customer must be able to afford the repayments (including any other mortgage payments) without taking into account any rent received Repayment vehicles for Interest Only mortgages must follow residential lending policy
these people (who I've never heard of until just now) require 60% LTV and offer 3.4% APR
https://www.themelton.co.uk/buy_to_let_mortgages/family-buy-to-let-discounted-rate-for-term-3-75/0 -
Nope. To get a residential mortgage you have to be living in the property yourself.
This is not correct.
I have a residential mortgage on a property that I do not (and was never intending) to live in and this was declared when I applied for the mortgage.
Lots of holiday homes and second homes are purchsed with a residential mortgage.0
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