2nd home rented to family

xylophone

Yes house is legally mine, but morally it isn’t

I'm afraid this will cut no ice with HMRC.

laticsforlife

oh, missed that the OP IS the legal owner - darn it scratch earlier advice!

Go see that accountant, I'm sure it can be considered to best avoid any charges.

likklegem

Yeah it was a condition of the mortage that the house was in my name. Got appointment with funny enough dads accountant on Monday so we can file tax returns. Said it was straight forward and wouldn’t be too much in tax. More relieved than anything now. Annoying about the tax bough

Sea_Shell

Do you have a will?

You need to consider what needs to happen (or you'd want to happen) if you were to predecease your Dad.

Do you have life insurance that would settle off the mortgage?

silvercar

Dad could be a beneficial owner without being on the title deeds through a deed of trust.

likklegem

Yeah I’ve got a will. We’ve got two young children so when the second one was born we got one wrote. We’ve since updated it so if I die my 50% share of house is split four ways between my two children and my two sisters. My home automatically goes to husband as per deeds. Husbands will is a mirror one stating the same (he’s got no surviving family).

We’ve not got life insurance tied against that property. I’ve got my works pension and a very basic life insurance which will enable my husband to continue to remain in our home and support our children.

I’ve not heard of a deed of trust.... is this something easy to set up?

xylophone

OP, can you clarify the situation?

Your mother inherited a property.

You decided to buy the property from your mother.

In order to do so, you needed a deposit and a mortgage loan.

Did your father make you an outright gift of the money for the deposit and you declared this gifted deposit to the mortgagee?


You have told the mortgagee that you are renting the property to your father?

The £400 a month he is paying is rent.

If he were living rent free see

https://www.icpa.org.uk/portal/tax/poat_out_the_frying_pan_into_fire

The house appears to be both legally and beneficially yours/your husband's.

Should you not be insuring your lives such that if one of you were to predecease your father, the mortgage would be paid off in full?

And had you considered what would happen if your father found himself in the position where he could not afford the rent?

likklegem

Sorry yes. The house has been in our family since it was built in 1900s. My granddad died and left it to my mother and aunt.

My dad has been remarried and subsequently divorced. His second wife was an absolute cow but that’s another story and literally cleared him out. He was effectively homeless, and as family matters to all of us was living with my mum despite them being divorced.

Yes my dad made an outright gift for the deposit. We paid all the fees and spoke to a mortage broker who arranged this. We have been upfront that dad was paying the mortage, and he gifted the deposit. He had to sign a letter for the solicitor who did the contracts.

Admittedly if he couldn’t pay, we could afford to step in and pay it although it would be tight for us financially. I wouldn’t ever see dad homeless. He’s done a lot for me, and it’s the least I can do for my parents given everything they’ve done to help me in the past.

I can’t say it’s turned out to be my wisest move. I was emotionally attached to our old family home and didn’t want it to leave the family so to speak. Not the wisest decision to do in hindsight.

Dad did try to purchase it, but because of his age and given he was at the time on a mortage with the ex was rejected (being self employed didn’t help either)

Dad doesn’t plan on retiring ever. He’s quite adamant on that. He’s still working in excess of 80 hour weeks. He’s freelancer now since he was made redundant 8 years ago. He’s got a decent pension which he can claim from last year which would cover the mortage and living costs he’d incur from a final salary pension scheme, and his tax returns last few years are healthy. Not flashy but survivable if he wants to work. He’s been saving a bit up for his retirement too. We’ve talked briefly about him ‘buying the place’ but he hasn’t got enough saved to clear the mortage so it’s a bit of a none starter.

I’ve checked our life insurance and should either husband or I die before my dad there would be just enough to clear the mortage debt outstanding on our home and my granddads, turned out to be more than I realised. But that would mean day to day living would be difficult for either my husband or I.

xylophone

He’s got a decent pension which he can claim from last year which would cover the mortage and living costs he’d incur from a final salary pension scheme,

Is Dad deferring drawing his FS pension?

If so, has he checked that this is his wisest course of action?

xylophone

And has Dad checked his state pension situation?

https://www.gov.uk/check-state-pension