Is this possible? Helping family

Jenniefour

JJM100200 wrote: »

I think it is that this particular person has done a lot for me over the years. I got my chance in life to get on the housing ladder by someone giving me a deposit.

Then you could gift him a contribution to his deposit when his defaults have dropped off and he can get a mortgage.

In the worst case scenario I could write the debt off, though I would not tell them that.

I suppose I could just gift them the property..

Neither of the above, writing the debt off or gifting the property, takes into account any unexpected curveballs life might throw at you. You're in a better position to weather them and that's not something to throw away lightly.

G_M

JJM100200 wrote: »

I suppose I could just gift them the property but I believe if i have understood the .gov.uk website properly i would have to pay tax and they could be taxed also if they sold the property at any point.

You would not have to pay tax if you gift him the property. And nor would he.
* Income Tax? No.
* Capital Gains Tax? Providing it used to be your main residence, no.
* SDLT? There's no 'consideration' (payment) so no (and anyway it's below the threshold)

The only possible tax would be Inheritance Tax. If you gift him the property as opposed to selling it to him, and then die within 7 years, then the value of the gift (subject to some reductions) would be added to your Estate for IHT purposes.

But there again, if you sell it to him, then your Estate will include that amount anyway since you won't have spent the money, having instead lent it to him with the Charge on the property.

PersianCatLady

Why don't you have a "trial run" at the idea for say two years??

Let him live there and treat the place as if he owned it.

I am sure that you have some idea of what the repayments would have been on your private mortgage scheme so why don't you charge him the same amount but call it rent.

In two years time, if he has kept up with the rent and you are happy with everything then you could go ahead with your private mortgage scheme.

You could either count the first two "rental years" as part of the mortgage term and deduct them from the £60,000 or you could treat that money as a little bit of security for you.

AnotherJoe

JJM100200 wrote: »

That is a good shout. I think it is that this particular person has done a lot for me over the years. I got my chance in life to get on the housing ladder by someone giving me a deposit. In the worst case scenario I could write the debt off, though I would not tell them that.

I suppose I could just gift them the property but I believe if i have understood the .gov.uk website properly i would have to pay tax and they could be taxed also if they sold the property at any point.

You haven't. Neither are correct. If you gift it to him there's no tax, once it's his and as long as he lives in it, if he sells, there's no tax.

nimbo

I thought that anyone providing a loan and charging interest on that loan had to be a member of a regulatory body? I thought this was one of the many rules that loan sharks were breaking? (Not implying you are a loan shark op - just trying to explian why I thought the regulatory body thing).

I'm sorry if I'm wrong.

How would him him defaulting be managed? What happens if he were to die in six months - does the house get left to you? Does he have to have some insurance policy paid to you on his death?

I think it's an admirable thought. And yes we can all fall foul of the partner and credit - but we can all also say no thanks. And live within our means ( when we earn 30k - living in poverty different issue)...

I'm no saint and have had credit. But him waiting 2 or three years to be considered a lower risk to banks while ha saves a deposit isn't the end of the world - and will help him to reassess his thinking on money.

davidmcn

nimbo wrote: »

I thought that anyone providing a loan and charging interest on that loan had to be a member of a regulatory body?

No, it's only regulated if you're lending in the course of a business.

getmore4less

G_M wrote: »

You would not have to pay tax if you gift him the property. And nor would he.
* Income Tax? No.
* Capital Gains Tax? Providing it used to be your main residence, no.
* SDLT? There's no 'consideration' (payment) so no (and anyway it's below the threshold)

The only possible tax would be Inheritance Tax. If you gift him the property as opposed to selling it to him, and then die within 7 years, then the value of the gift (subject to some reductions) would be added to your Estate for IHT purposes.

But there again, if you sell it to him, then your Estate will include that amount anyway since you won't have spent the money, having instead lent it to him with the Charge on the property.

If you mean taper relief there won't be any on a £70k gift.

gifts don't really get added to the estate they just don't drop out till 7 years have passed

getmore4less

If you really don't need the place(or the cash) and it is something this relative would benefit from then the gift no strings has a lot of merit.

If you can live with the no obligations to help on the boat project although I suspect they may feel this is implicit with the gift.


Another option you could consider is to offer the place on the basis of them being a caretaker for a set period.
Help them out no rent so a chance to save.
They get to live in the area.
You get to keep the house as a back up if the boat thing does not work.

In a couple of years(or whatever it takes to commit to the boat or back out) you can review the situation.

Keep, Sell, sell to them, gift....

saajan_12

I echo everyone's thoughts about mixing money and family.. even if you're right, 'doing what you need to do' can be harsh e.g. repossession, and can make him hate you. It's one thing if it's a stranger, but with family it can ruin the relationship. However if you're decided on doing it, here's my list of things to nail down and agree before you go in, to minimise misunderstanding / ill will.

* interest rate (fixed or base rate + x?)
* mortgage payments & frequency & total to pay off including interest
* what happens if they can't pay (payment holiday? how long?)
* what happens after that (repossession? how long do they have to move out? what value to sell at.. EA's valuation/auction..)
* overpayments at any time?
* can he rent out the house / use it as a business?

AnotherJoe

Just a thought about the downside of "no strings gift" which otherwise has a lot of merit.

OP, how would you feel if the recipient sold up 5 minutes after you transferred the house to him and spent the money on wine women and song? Presumably if you had already sold in preparation for your trip, you wouldn't just give him £70k cash to spend on just anything?

So, on that basis, something along the lines of what GM4L suggested, him as "rent free" caretaker for a couple of years (but paying all your bills), and then review the situation in a couple of years time, for example if he's fallen into arrears and is in a financial mess then seems pointless to give him this or get into a loan agreement with him?