Selling share of our house to son when downsizing

Dodo48

We are in our 70s and considering downsizing to live nearer our daughter in the North of England. We have lived in our house for 30 years and paid the mortgage off 10 years ago. Our house is worth £700,000 (mad London prices).  We are looking to purchase a house  for up to £350,000.  Our son would love to keep the family home for his own future family but could not afford to buy it now.   We are not looking to avoid IHT or tax, but wondering if we could sell a half share of our house to our son for £350,000.  We would then leave him the half share in our Will, and the house in the North to our daughter.   Both our children are happy with this proposal but would there be any traps we could fall into financially for us or them? 

davidmcn

Does your son have £350k cash? I assume not, but he's not going to be able to mortgage half a house.

Dodo48

No - he does have a house with a £350k mortgage which he would plan to sell.  Isn’t it possible to get a mortgage on a share of our house?  

Comms69

Surely the easiest way is to sell and give him £350k to buy somewhere

Salemicus

No, of course not. The whole point of a mortgage is that if you don't pay, the bank can recover their money by selling the house.

[Deleted User]

Dodo48 said:

No - he does have a house with a £350k mortgage which he would plan to sell.  Isn’t it possible to get a mortgage on a share of our house?  

No, it’s not. How would a lender repossess just half a house if he fell behind with the mortgage payments for whatever reason. He might be able to get a mortgage that you’re both party to where he’s the only one legally responsible for paying the mortgage but you both remain legal owners. I can only think of one lender who might do that and I’m not sure even if they did they would during covid. 

If you intend to leave your son the other half as an inheritance you could gift him half the equity now and he buy the other half with a mortgage. That could leave your other child with diddly squat as an inheritance though whilst your son gets £350k. 

xylophone

It might be possible for you to sell your son the house at undervalue - you would in effect be gifting his inheritance now.

You would then have £350,000 with which to buy the house in the north.

You and your spouse would own the house in the north as tenants in common and would make wills each leaving your share to your daughter but with an Immediate Post Death Interest in Possession Trust in favour of the surviving spouse.

This would go  some way to protecting an inheritance for your daughter but in the event that you both had to go into means tested care, the likelihood is that the house would need to be sold to fund it.

This could mean little or no inheritance for your daughter.

getmore4less

How much equity does son have in his house? 

Labtec81

If you intend to leave your son the other half as an inheritance you could gift him half the equity now and he buy the other half with a mortgage. That could leave your other child with diddly squat as an inheritance though whilst your son gets £350k. 

That's not necessarily true though is it as the OP already said they'd be leaving their new house to their daughter that they are paying £350,000 to buy it.....

Mojisola

xylophone said:

in the event that you both had to go into means tested care, the likelihood is that the house would need to be sold to fund it.
This could mean little or no inheritance for your daughter.

I know a family where this happened - one sister was given a lump sum to help buy a house - the other sister was reassured that it would be balanced up in the will but there was hardly any money left by the time their mother died.

p00hsticks

Labtec81 said:

If you intend to leave your son the other half as an inheritance you could gift him half the equity now and he buy the other half with a mortgage. That could leave your other child with diddly squat as an inheritance though whilst your son gets £350k. 

That's not necessarily true though is it as the OP already said they'd be leaving their new house to their daughter that they are paying £350,000 to buy it.....

But as xyophone has said above, the new property could end up having to be sold to fund a care home further down the line, leaving the daughter with little or no inheritance, whilst the brother has effectively had his up front and would be unaffected.