Buying house for CASH from Son-Letting it out to His ex-Subsidized rent.

[Deleted User]

getmore4less said:

Lover_of_Lycra said:

blindman said:

getmore4less said:

Does the private mortgage really solve the problem? 

With the buy and rent back you have the rental income and the potential for the value of the house to grow.

You effectively lend the ex £147k and come to some arrangement on a payment plan.
You are going to have to charge interest for it to be viable and may never see your money back in your lifetime.

Interest will be taxable as income and less than you could get in rent.

What can they afford a month?

Actually  it does not solve the problem.
Apart from the pitfalls as outlined above:
The Ex cannot afford the mortgage and and she will get no benefits towards it.
At the minute she pays £300 ish per month for her half of the mortgage.
If she rents she will get benefits for the rent.

The ex won't get any benefits towards the rent whilst she has savings of £16,000+.  She will be expected to use those savings to fund herself and once they have dwindled she still might not be entitled to help towards the rent if it is deemed a contrived tenancy.

I mentioned the pitfalls of sale and rent back on the first page, an activity that is regulated by the FCA.
https://www.handbook.fca.org.uk/handbook/PERG/1/?view=chapter

With the private mortgage you could look into doing something like an equity loan where the loan is based on the value of the property rather than just a straight £X.  

Maybe you need to separate the idea of having an investment property and helping out your son and his ex.  I think you can help out your family but it won't be a good investment for you.

That is a beneficial interest so SDLT for second properties comes back into the numbers.

I'm not so sure it would count as a beneficial interest in the sense of it being any kind of ownership. It's just a different way of calculating the repayment of the secured loan in more or less the same way as the HTB EL scheme works.  I'm sure this is how @AnotherJoe set up the loan to his daughter to buy a house.

In fact it was discussed in another recent thread where someone was looking to lend money to the outlaws.

[Deleted User]

blindman said:

Lover_of_Lycra said:

blindman said:

getmore4less said:

Does the private mortgage really solve the problem? 

With the buy and rent back you have the rental income and the potential for the value of the house to grow.

You effectively lend the ex £147k and come to some arrangement on a payment plan.
You are going to have to charge interest for it to be viable and may never see your money back in your lifetime.

Interest will be taxable as income and less than you could get in rent.

What can they afford a month?

The ex won't get any benefits towards the rent whilst she has savings of £16,000+.  She will be expected to use those savings to fund herself and once they have dwindled she still might not be entitled to help towards the rent if it is deemed a contrived tenancy.

I mentioned the pitfalls of sale and rent back on the first page, an activity that is regulated by the FCA.
https://www.handbook.fca.org.uk/handbook/PERG/1/?view=chapter

With the private mortgage you could look into doing something like an equity loan where the loan is based on the value of the property rather than just a straight £X.  

Maybe you need to separate the idea of having an investment property and helping out your son and his ex.  I think you can help out your family but it won't be a good investment for you.

So how does my son and  his ex make the transition from:-
Owning a £180K value house with £114 outstanding, each paying circa£300 per month to a mortgage lender.
To
Me being the mortgage lender to his ex, with son being given his equity from the change and his Ex possibly getting her equity?
Thanks

Why would the ex be getting equity?  Wouldn't her share of the equity be used as the deposit for the mortgage with you unless you are proposing a 100% LTV mortgage?

As for changing the mortgage lender to you and a change in ownership it's really not that different to her remortgage with a different high street lender.

getmore4less

Lover_of_Lycra said:

getmore4less said:

Lover_of_Lycra said:

blindman said:

getmore4less said:

Does the private mortgage really solve the problem? 

With the buy and rent back you have the rental income and the potential for the value of the house to grow.

You effectively lend the ex £147k and come to some arrangement on a payment plan.
You are going to have to charge interest for it to be viable and may never see your money back in your lifetime.

Interest will be taxable as income and less than you could get in rent.

What can they afford a month?

Actually  it does not solve the problem.
Apart from the pitfalls as outlined above:
The Ex cannot afford the mortgage and and she will get no benefits towards it.
At the minute she pays £300 ish per month for her half of the mortgage.
If she rents she will get benefits for the rent.

The ex won't get any benefits towards the rent whilst she has savings of £16,000+.  She will be expected to use those savings to fund herself and once they have dwindled she still might not be entitled to help towards the rent if it is deemed a contrived tenancy.

I mentioned the pitfalls of sale and rent back on the first page, an activity that is regulated by the FCA.
https://www.handbook.fca.org.uk/handbook/PERG/1/?view=chapter

With the private mortgage you could look into doing something like an equity loan where the loan is based on the value of the property rather than just a straight £X.  

Maybe you need to separate the idea of having an investment property and helping out your son and his ex.  I think you can help out your family but it won't be a good investment for you.

That is a beneficial interest so SDLT for second properties comes back into the numbers.

I'm not so sure it would count as a beneficial interest in the sense of it being any kind of ownership. It's just a different way of calculating the repayment of the secured loan in more or less the same way as the HTB EL scheme works.  I'm sure this is how @AnotherJoe set up the loan to his daughter to buy a house.

In fact it was discussed in another recent thread where someone was looking to lend money to the outlaws.

It's a beneficial interest an OP of a thread has had that confirmed by their legal representative. 

HMRC definitely think of it as a beneficial interest. 

I think AJ is thinking of ripping up the agreement to evade their potential CGT liability.