Gifted property - mortgage implications

Determinedtobedebtfree

I’m sorry but I’m not looking for judgement on my dads decision and I don’t know his thoughts just what I’ve been told this week. 

We’ve experienced a really horrible loss recently and I was only looking for mortgage advice not to be judged. 

Mojisola

Determinedtobedebtfree said:

I’m sorry but I’m not looking for judgement on my dads decision and I don’t know his thoughts just what I’ve been told this week.

We’ve experienced a really horrible loss recently and I was only looking for mortgage advice not to be judged.

No judgement - just my experience.

In his distress after your family's loss, he may not have thought of his future other than having his home to live in.

getmore4less

Are you sure this life rent is for all the house? 

What has the solicitor said about the taxes on the trust?

Determinedtobedebtfree

Yes, we’re aware of tax implications and the solicitor has shared a lengthy email explaining these (including IHT). 

Our concerns were around moving house/changing mortgage and the impact of owning a share in a second property. We’ve been advised that they’re won’t be an impact on stamp duty (as long as we’re changing one main residence for another within an 18 month window)...and as there’s no mortgage on this property, we hoped they’re be no impact on lending. 

Thanks 

[Deleted User]

Only impact on lending is that some lenders will take the running costs of this property as a commitment as its not got any income from rhe property to offset them. 
Also some lenders will restrict ltv to 75% on a purchase as you have another property in your name 

Determinedtobedebtfree

Thank you, that’s really helpful. 

75% LTV won’t be a problem for my brother, he’s got a really large deposit and is probably looking at 40% LTV.  We bought a new house last year with a much larger LTV but we have no intention to move. Our fixed rate is due for renewal this year but as long as rates are good, we could stay with our existing lender. We’re overpaying our mortgage so should be at 75% LTV in the next few years. 

Running costs is fine, as I presume this will be divided by 3 (as I’ll own the house with my siblings). We also didn’t borrow near our maximum salary multiplier, so that shouldn’t be a concern. 

Thanks, really helpful 

Kat78MFW

You and your siblings must make sure to update your wills to say what should happen to your share of the house if you pre-decease your father.
Also before going ahead, you all need to consider what would happen if any of you were to divorce or go bankrupt. The roof over your father's head could end up at risk.
Finally, you should remember that if your father does ever need care, the council may consider giving away his home to be deprivation of assets and they might carry out their calculations as though he still owned the house. 

getmore4less

If this is a proper liferent situation you don't have any beneficial interest in the house meaning there are no second property taxes.

The property belongs to a trust not you. 

AIUI That trust gets subject to potential CGT which is higher than other options as it can't make use of PRR. 


Can also still be looked at as deprivation of assets later as that appears to be the only reason for doing this. 

MWT

Still very unclear if this is a 'Liferent Trust' or a gift to the children as both seem to have been referred to in the answers and many of the replies assume one or the other...

I would suggest getting that point clear and if it is a trust then make sure you understand who the trustees are as they will be the ones making decisions about the property during his lifetime.

Determinedtobedebtfree

Hello, I’ve checked with the solicitor and there is no trust. It’s a transfer of title with my dad having a Liferent with stipulates that he pays the running costs without paying rent for his life. My dad is doing this to simplify probate and his estate. The solicitor also advised that he’s never known this to cause a problem with lenders. Thanks everyone.