Buying house from parent

Lenw

I wander if anyone can offer advice. I’m looking to buy a house off of my Mum. The house is valued at £350k, the current mortgage is £210k.

My mum only wants me to cover the mortgage so I’m effectively buying the house for £210k. To save paying extortionate Stanp duty (it will be classed as a 2nd home) I wanted the purchase price to be £210k, but I also need a mortgage for the full £210k.

The problem is whether a mortgage lender will see this as a 100% mortgage, or a 60% mortgage (as the house value is still £350k regardless of what I have paid).

Has anyone experienced on doing something similar?

Any advice appreciated- cheers

xylophone

This is your mother's home and she intends to continue to live there?

https://www.co-oplegalservices.co.uk/media-centre/articles-jan-apr-2017/can-i-buy-my-parents-house-under-market-value/

Pixie5740

Lenw wrote: »

I wander if anyone can offer advice. I’m looking to buy a house off of my Mum. The house is valued at £350k, the current mortgage is £210k.

My mum only wants me to cover the mortgage so I’m effectively buying the house for £210k. To save paying extortionate Stanp duty (it will be classed as a 2nd home) I wanted the purchase price to be £210k, but I also need a mortgage for the full £210k.

The problem is whether a mortgage lender will see this as a 100% mortgage, or a 60% mortgage (as the house value is still £350k regardless of what I have paid).

Has anyone experienced on doing something similar?

Any advice appreciated- cheers

It's a concessionary purchase where the equity being gifted to you will form the deposit. Not all lenders will like this so it may be wise to engage a mortgage broker.

The SDLT due is based on the consideration paid for the property which in your case will be £210k meaning a SDLT liability of £8,000.

I hope your mum has taken professional advice because attempting to DIY estate planning could result in a triple whammy of tax; SDLT, CGT and IHT. Should your mum require care later in life the council can come after the equity she has given away under the depreciation of assets rules.

Keep_pedalling

If that £140k of equity is your mother s only substantial asset she would be incredibly stupid to give it away.

If you run into financial trouble, get caught in an expensive divorce or die before she does she could find herself homeless.

Lenw

Thanks for your replies. I should have made it clear that she currently lets the property so she won’t live there and is not reliant on the income from this property or the equity held in it.

xylophone

Your mother is selling you a property which is not her PPR at undervalue.

Check out transactions between connected persons in respect of CGT?

Check out the SDLT position.

Check out the IHT position.

Take professional advice.

Lenw

From a mortgage perspective would I be able to get a 210k loan, on a £210k mortgage and it be classed as a 60% LTV (on the basis it will be valued at £350k)?

Lenw

That last comment should have read:-

From a mortgage perspective would I be able to get a 210k loan, on a £210k PURCHASE PRICE and it be classed as a 60% LTV (on the basis it will be valued at £350k)?

pramsay13

Definitely worth speaking to a broker.
For the purposes of the mortgage the mortgage company will use the value of £350k (well they will do their own valuation but I'm assuming this figure is correct).
There will be other questions to answer about purpose and affordability of repayment etc.

AnotherJoe

So it will likely cost your mother to sell you this since she'll clear the mortgage and be left paying whatever CGT is due on £350k, not £210k.

Lenw

Will the CGT be based on £350k or the £210k? The sale will show as £210k?
To be clear (as I tried to keep simple), my mum wont be left out of pocket as I’ll be covering any costs incurred as a result of the sale.
Thanks for all your help guys