Buying Home from Parents

BradAnd94

I currently live in a house I rent from my parents. I am considering purchasing the property however I would want to spend some money on it (e.g. convert the downstairs cupboard into a toilet) The market value of the property is £110,000 but as I have been renting it for so long they are happy to sell it to me for £100,000.

I am led to believe that banks will treat the value of the property the lower of their valuation and the agreed purchase price, this means I couldn't get a mortgage of 90% of the £110,000 but only 90% of the £100,000. In this scenario I would then need to take another loan for the improvements as a higher interest rate.

Providing the bank value the property at £110,000 is there any reason that we couldn't set the purchase price at £110,000 and then once the sale is complete by parent transfer me £10,000 which I can use for renovations?

foxy-stoat

Your parents can sell the property to you for whatever they like and gift you money afterwards if they wish.

As long as when the property is valued at £110,000 there would be no issues....do you have enough cash deposit saved to get 90% LTV on £110,000?

They may have slightly more CGT to pay on the increase value by doubt that will be much anyway.

greatcrested

foxy-stoat said:

Your parents can sell the property to you for whatever they like and gift you money afterwards if they wish.
As long as when the property is valued at £110,000 there would be no issues....do you have enough cash deposit saved to get 90% LTV on £110,000?
They may have slightly more CGT to pay on the increase value by doubt that will be much anyway.

Their CGT liablity would be based on market value, not sale value, so that is unaffected.

foxy-stoat

greatcrested said:

foxy-stoat said:

Your parents can sell the property to you for whatever they like and gift you money afterwards if they wish.
As long as when the property is valued at £110,000 there would be no issues....do you have enough cash deposit saved to get 90% LTV on £110,000?
They may have slightly more CGT to pay on the increase value by doubt that will be much anyway.

Their CGT liablity would be based on market value, not sale value, so that is unaffected.

Would £10,000 either way on a sale of £100,000 property get picked up once the sale is concluded, if it could then how?  

I mean if I was advertising a second property for £110,000 and took an offer of £100,000 then surely the "market value" would be £100,000 not what I had it up for.

davidmcn

foxy-stoat said:

greatcrested said:

foxy-stoat said:

Your parents can sell the property to you for whatever they like and gift you money afterwards if they wish.
As long as when the property is valued at £110,000 there would be no issues....do you have enough cash deposit saved to get 90% LTV on £110,000?
They may have slightly more CGT to pay on the increase value by doubt that will be much anyway.

Their CGT liablity would be based on market value, not sale value, so that is unaffected.

Would £10,000 either way on a sale of £100,000 property get picked up once the sale is concluded, if it could then how?  

I mean if I was advertising a second property for £110,000 and took an offer of £100,000 then surely the "market value" would be £100,000 not what I had it up for.

Indeed, obviously the net price is actually £100k. Lenders aren't as prepared to overlook "cashback" deals as they might have been in the old days, so trying to hide something like this is likely to constitute fraud.