Selling to son for outstanding mortgage or correct value ?

[Deleted User]

I bought a buy to let House a while back
Cost £330,000

Now valued at £400,000

Mortgage is now £ 220,000 as I put 25% deposit and paid some extra

For capital gains return I know of course value should be £400,000

Son has 10% deposit saved as that was part of the deal to prove he could afford house when I was finished letting it out, which I am now. Its vacant

What is best for mortgage for him please as Im sure Ive read some mortgage companies dont like undervalues ?

1. Sell him at £220,000 and he also has his 10% deposit £40k - mortgage £180k
2. Sell at £400,000. Gift him the whole equity as his deposit, plus he puts in his own £40k - mortgage still £180k

I havent approached broker yet as tenant just left and I thought Id think ( ask MSE) about best option

[Deleted User]

Densol wrote: »

I bought a buy to let House a while back
Cost £330,000

Now valued at £400,000

Mortgage is now £ 220,000 as I put 25% deposit and paid some extra

For capital gains return I know of course value should be £400,000

Son has 10% deposit saved as that was part of the deal to prove he could afford house when I was finished letting it out, which I am now. Its vacant

What is best for mortgage for him please as Im sure Ive read some mortgage companies dont like undervalues ?

1. Sell him at £220,000 and he also has his 10% deposit £40k - mortgage £180k
2. Sell at £400,000. Gift him the whole equity as his deposit, plus he puts in his own £40k - mortgage still £180k

I havent approached broker yet as tenant just left and I thought Id think ( ask MSE) about best option

As a parent it's fine to gift your son equity to use as all/part of his deposit in terms of getting a mortgage.

getmore4less

I think you will find that option 1 and 2 are really the same as all you get is £220k.

From a lenders point of few the rest(£180k) is a gift in both cases.
LTV 55% most cheap deals available(some need 50%)

CGT assessed on the full value.

SDLT on consideration

SDLT_Geek

The amount on which your son will pay SDLT will depend on how the transaction is structured. This is discussed here: https://www.blakemorgan.co.uk/bank-of-mum-and-dad-concessionary-purchases/ This deals with transactions which are variously referred to as concessionary purchase / transfer at undervalue / gifted equity / family discount/ genuine bargain price.