Straight from Transfer of Equity to Transfer of Mortgaged Property

phb30432

Hello all, I am new to the forum, although I have used it many-a-time for advice and guidance. I would like anybody's input on my following situation:

My father has a buy-to-let property, he is 67 and about to retire, and I am 33 in full-time employment. In October 2017 he did a Transfer of Equity and added me on to the title deeds and mortgage. He now wants to do some additional borrowing against the property in order to buy another buy-to-let property. He has spoken to the lender who says they can lend up until the eldest mortgagee turns 75, but this is not desirable due to the likely heavy monthly payments, and unlikelihood of the rental income even covering them. My father asked about the option of using my age for a possible longer term, but the lender refused, however suggested something else...

They said that my father could do a Transfer of Mortgaged Property (TOMP) in to my sole name, as long as 6 months had lapsed since I was added via the Transfer of Equity. Following this, I could apply for the additional borrowing using my age, and as long as affordability was okay relative to my particulars, I could borrow the money for "buy-to-let purposes". My father did ask about any tax implications for him, or indeed me, but the lender said they could not comment, as they are not trained to do so.

The index value the lender holds for the property is £418,000. There is a mortgage currently on it of £107,000, and my father would like to borrow a further £120,000 against the property. The current remaining term is just under 12 years.

I would like to ask the following questions:

(1) Are there any tax implications for my father if he was to do the Transfer of Mortgaged Property, resulting in the property being in my sole name?

(2) Are there any tax implications for me if my father was to do the Transfer of Mortgaged Property, resulting in the property being in my sole name?

(3) Should I successfully apply for the additional borrowing in my sole name, is the lender likely to increase the term of the current mortgage without penalty, in light of my significantly lower age?

Thank You in advance for any responses received.

Tom99

[FONT=Verdana, sans-serif]Its not clear to me which of the following the lender is suggesting:

[/FONT] [FONT=Verdana, sans-serif]1 - You both remain legal owners of the property and both offer it up for a mortgage but with only you on the mortgage as 'borrower'.[/FONT]
[FONT=Verdana, sans-serif]2 - Your father transfers his legal share to you so that you are the sole legal owner.

[/FONT] [FONT=Verdana, sans-serif]Which do you think is being suggested?[/FONT]

phb30432

Hello, thank you for your response.

The lender is suggesting that my father relinquish his interest in the property, so as to make me the sole legal owner, the only mortgagee and the only named person on the title deeds.

Out of interest, do you know of lenders who would accommodate my father's original request of the both of us staying on the mortgage, but only using my credentials to raise additional funds against the property? If so, perhaps we could consider a different lender??

Tom99

[FONT=Verdana, sans-serif]In the past some forum members has said HSBC have such a product but you would need to check.[/FONT]
[FONT=Verdana, sans-serif]https://forums.moneysavingexpert.com/discussion/5118119 [/FONT]

Tom99

phb30432 wrote: »

Hello, thank you for your response.

The lender is suggesting that my father relinquish his interest in the property, so as to make me the sole legal owner, the only mortgagee and the only named person on the title deeds.

Out of interest, do you know of lenders who would accommodate my father's original request of the both of us staying on the mortgage, but only using my credentials to raise additional funds against the property? If so, perhaps we could consider a different lender??

[FONT=Verdana, sans-serif]Sounds like it will raise a number of tax issues:

[/FONT] [FONT=Verdana, sans-serif]Maybe some CGT on your fathers part disposal last year and then on the disposal of the remainder this year.

[/FONT] [FONT=Verdana, sans-serif]Will you pay your father for his share?

[/FONT] [FONT=Verdana, sans-serif]There may be stamp duty on that transfer.

[/FONT] [FONT=Verdana, sans-serif]Will you be able to set off the full mortgage interest on your increased loan against rent?

[/FONT] [FONT=Verdana, sans-serif]If you are not paying your father for his share, how is you father then going to use the money you have raised as a deposit, gift/loan?

[/FONT] [FONT=Verdana, sans-serif]I am sure others will be able to comment in more detail.[/FONT]

phb30432

Tom99 wrote: »

[FONT=Verdana, sans-serif]Sounds like it will raise a number of tax issues:

[/FONT] [FONT=Verdana, sans-serif]Maybe some CGT on your fathers part disposal last year and then on the disposal of the remainder this year.

[/FONT] [FONT=Verdana, sans-serif]Will you pay your father for his share?

[/FONT] [FONT=Verdana, sans-serif]There may be stamp duty on that transfer.

[/FONT] [FONT=Verdana, sans-serif]Will you be able to set off the full mortgage interest on your increased loan against rent?

[/FONT] [FONT=Verdana, sans-serif]If you are not paying your father for his share, how is you father then going to use the money you have raised as a deposit, gift/loan?

[/FONT] [FONT=Verdana, sans-serif]I am sure others will be able to comment in more detail.[/FONT]

My father will not require me to pay him for his share, in essence he will gift it to me.

The current mortgage repayments at the current term, added to the additional borrowing mortgage repayments at the extended term will not be offset by the rent, we will likely need to have the whole mortgage term extended until my retirement age.

My father and I are trying to acquire this new property to add to our joint portfolio. So, if it meant that the money is being raised by way of additional borrowing in my sole name, then I would take steps to buy the intended property in my own right moving forward.

Thanks Again for your reply Tom.:beer:

silvercar

Any disposal by your father of his share in the property will be subject to CGT. Just as it was when he disposed of his share to you a few months ago.

Tom99

silvercar wrote: »

Any disposal by your father of his share in the property will be subject to CGT. Just as it was when he disposed of his share to you a few months ago.

Yes is your father aware of that and put money aside if due? Both disposals, last year and this, will be deemed to be at open market value despite no price being paid because you are connected persons.