Please few main message as quite detailed .

phill2-0-0-3

Hi I'm looking at moving back to my parents property and building them a granny annex . I currently have a morgage . My parents are getting on in years and I'd like to be closer to them . Plus my children with my x live in the same area . I can't afford to buy there as house prices as very high . My parents said they will gift me there house if I could build them a granny annex /extension on the side . I was wondering if I could change my morgage to a buy to let morgage.then get my parents house put in my name and get a smaller morgage for myself on there property to build the annex and a rear exstention approx £130,000 . currently Have a 160k morgage . My income isn't great at 15k a year . I work to cover my needs but keep spare time for my kids . I have a gf . But we haven't been together long enough to get a morgage together although she will help with bills ECT . Do u need a good income to get buy to let ? Or do they go off the expected rental income ? I have about 33% equity in the house . Worth nearly 300k own 100k . But don't have any savings left and would need some sort of deposit to get a lower morgage on the other property . Would it just be better to sell my property and use the equity in my house to pay for the exstentions . As ideally I'd like to keep the house for my kids later in life? Many thanks

da_rule

Sorry Op but your post is not particularly clear, so just to confirm:

1) You have a house (with a mortgage) that you want to keep and rent out when you move?
2) Your parents want to gift you their house?
3) They want to then continue living in the property (albeit in a newly constructed granny annex)?

da_rule

Assuming the above is correct, there are then some follow up questions:

1) Do you need to keep your current house? Have you read up on how complicated it is to be a landlord and what your liabilities and risks are?
2) Does your parents house have a mortgage?
3) Have you considered whether you are likely to get planning permission for the annex?
4) Have you worked out how much the annex will cost to build?
5) Have you read up on deprivation of assets, gifts under value and gifts with reservation of benefit?

G_M

Speak to an independant mortgage broker about


* getting a BTL mortgage on your current house and
* getting a residential mortgage on your parent's house once it is in your name


Sounds dubious......




Is there currently a mortgge on parents house?


The Gift of the prroperty is likely tto be a 'Gift wih Reservattion' as your parents wwill still live here. so it would remain wihin their Estate if/when they die for Inheritance Tax.


There will be an additional 3% SDLT when the gift is made (2nd property).

phill2-0-0-3

Many thanks . And sorry for the late response . I normal get notifications about the replies but for some reason I haven't .

1 , there in no morgage on there property .
2 , there is a morgage on my property approx 160k morgage house is worth 260k .
3, my builder has gave me a price and is doing a pre approval scetch and putting that in before full plans so will no soon if it's fiesable .
4, for the case of inheritance , if I was to sell my property use the equality to build the granny annex and rear exstention . Then later in life if when my parents pass god forbid . As this will be my main restidence will they still try and take the property if it's my only home and in my name ? Many thanks

Cre

I am looking at getting a property with my parents as well.

You need to look carefully at inheritance tax. If your parents gift you the house and then remain living on site it will still be part of their estate as it will be considered "deferred benefit or something like that.

da_rule

There are 4 issues here:

1) Gift with reservation of benefit - If your parents gift you their property (i.e. you pay less than the full market value, or nothing at all, for it) and they continue to live there rent free this is a gift with reservation of benefit. This means that the value of the house will always be considered when calculating if they owe any inheritance tax on their death.

2) Life time gifts - If your parents move out of the property or pay you a market rent for remaining there then the gift will be a lifetime gift. This means that it will be counted towards inheritance tax for 7 years (this does taper off so not the full amount will count for all 7 years).

3) Deprivation of assets - If your parents gift you property under value and then need care (nursing home etc) then the Local Authority can include the value of the property in their means assessment as notional capital. You may therefore find yourselves having to foot the bill. This only applies though if you have reasonable contemplation at the time of making the gift that you will need care (i.e. if your parents are currently fit and healthy this should not apply).

4) Homelessness & Benefits - If you and your parents fall out and they move out, it could be argued that by gifting you their only home that they have made themselves intentionally homeless, as such they will only be entitled to very limited support. They will also need to be careful when/if they apply for certain benefits, as again, deprivation of assets can apply to most mean tested benefits.

warby68

I would think your income will make most of this a non-starter.

£15k pa wouldn't get you your own current mortgage if starting again.

Closest possibility appears to sell up, use your £100k equity and only need a £30k mortgage for the rest of the extension.

However the above risks then kick in.

phill2-0-0-3

Yes it is a concern . I was under the impression that if I child lives with there parents then the house can't be sold . My sister will also be on the morgage at my parents , she earns around 11k we have been pre approved a morgage of 160k , ideally I'd be doing all this so my parents don't have to go into a care home , so I'm close enough to look after them as much as possible , I have got a deal with my builder for total build at 75k with both exstentions . Hes done a lot of building work for me , so I no I can trust him , but there house would need a full make over as it's very dated so possibly 10/15k on top , my parents are 69 and 67 . Both in good health , I've been told if there's a morgage on the house it won't be used as part of the estate as the bank own it ? Many thanks again .

AdrianC

What happens if your sister is a part-owner, and she hits financial difficulties?

This idea is getting worse. Use your equity in your current house to help you afford this one. Give up on the BtL idea.

Have you even looked at the viability of renting out your current place? What's the yield? What's the market? Would you be self-managing? Do you have sufficient reserves for when your tenants do a runner leaving you with a trashed house and rent arrears?

p00hsticks

da_rule wrote: »

There are 4 issues here:

1) Gift with reservation of benefit - If your parents gift you their property (i.e. you pay less than the full market value, or nothing at all, for it) and they continue to live there rent free this is a gift with reservation of benefit. This means that the value of the house will always be considered when calculating if they owe any inheritance tax on their death.

2) Life time gifts - If your parents move out of the property or pay you a market rent for remaining there then the gift will be a lifetime gift. This means that it will be counted towards inheritance tax for 7 years (this does taper off so not the full amount will count for all 7 years).

3) Deprivation of assets - If your parents gift you property under value and then need care (nursing home etc) then the Local Authority can include the value of the property in their means assessment as notional capital. You may therefore find yourselves having to foot the bill. This only applies though if you have reasonable contemplation at the time of making the gift that you will need care (i.e. if your parents are currently fit and healthy this should not apply).

4) Homelessness & Benefits - If you and your parents fall out and they move out, it could be argued that by gifting you their only home that they have made themselves intentionally homeless, as such they will only be entitled to very limited support. They will also need to be careful when/if they apply for certain benefits, as again, deprivation of assets can apply to most mean tested benefits.

And a fifth


5) If your parents gift you your house and you later get into financial difficulties (go bankrupt , go through a messy divorce etc) then as the property is now your financial asset they could find it having to be sold from under their feet.