Buying Parents house at a reduced rate

Beartax

My wife and I are looking to buy her parents farmhouse, at a reduced rate. The house is probably valued at around £300,000, however they have offered to sell to us at £150,000, so that we might start a family close to them. (We're extremely lucky, we know!)

We intended on borrowing £135,000 placing a £15,000 deposit, however the broker has stated that mortgage lenders will lend against the value of the property, and would therefore insist that the purchase price is £300,000 with £150,000 deemed 'deed of gift'.

This is problematic as at £300,000 there would be £5000 stamp duty to pay, whereas at £150,000 this would only be £500.

Is there a simple, tax efficient way to be able to pay my in laws the £150,000, without having to list the purchase price at £300,000?

TIA for any help offered!

TrickyDicky101

Your parents can sell the house to you at whatever price they choose. SDLT is only payable on the 'consideration' of the transaction, which, if you are handing over £150k is £150k.

You can investigate 'concessionary' mortgage products which may mean you can borrow the full £150k from the lender (the 'deposit' effectively coming from the difference in value (£300k) and what you are paying (£150k).

Your broker doesn't sound very clued up if (s)he thinks the SDLT will be based on the £300k value - have they actually stated this or is this your interpretation of what they've said?

that

the parents should sell half the house at £150k (half the market value?) and keep the other half, and upon both parents death your family inherit the second half.

With one in three couples splitting up, if not amicable, child and child's partner will each gain 75k + half the saleable difference. Possibly forced to sell the family home, and leaving the parents £150k of their lifetime savings out of pocket.

Buying half, if the relationship dissolves, it is possible that the parents plus their child will still child will still own 75% share, may not lose the property.

Also any money accrued from the valuation of the property can be fairly divided, and no one is taken advantage off

Beartax

Hi thanks for that. It could well be that I've misunderstood and in fact we will still only pay SDLT on the £150k. It was the insistence that the purchase price of the property was to be listed at £300k that made me assume the SDLT would be based on this figure.

I think I may already be looking at a concessionary mortgage, and if I can confirm this with the broker, hopefully this should then make sense to my solicitor.

Thanks for your help.

TrickyDicky101

The purchase price will only be £150k as that's what you will pay for it. Sounds like the adviser has made a mistake.

mrginge

that wrote: »

the parents should sell half the house at £150k (half the market value?) and keep the other half, and upon both parents death your family inherit the second half.

With one in three couples splitting up, if not amicable, child and child's partner will each gain 75k + half the saleable difference. Possibly forced to sell the family home, and leaving the parents £150k of their lifetime savings out of pocket.

Buying half, if the relationship dissolves, it is possible that the parents plus their child will still child will still own 75% share, may not lose the property.

Also any money accrued from the valuation of the property can be fairly divided, and no one is taken advantage off

Of course the only problem being that the OP is planning on getting a mortgage.
:doh:

that

mrginge, it should be no difference than other shared ownership deals on the market?

Blueoctopus

We have just bought a house from my parents, we took out a mortgage for 90,000 as this was the amount my parents asked for the property.

The sale price was indeed the property value £180,000 and my parents had to declare the other £90,000 was indeed a gift.

It has benefitted us as we then didn't need to provide a deposit and can use our savings for home improvements and we were able to get a better interest rate at 50%ltv.
We didn't have a problem with stamp duty as as first time buyers at £180000 we were exempt.