Renting joint inherited property to daughter

Anntay550

AdrianC said:

If the intention is for the daughter to eventually buy the property, and there is no urgent pressing need for cash, then surely the best solution is for the property to be transferred straight to her name from the estate, with an agreement to repay the value of the bequest to the beneficiaries of the will over time - in effect, a private mortgage.

Then, when she's in a position to borrow, she can remortgage commercially and repay the family debt...?

No SDLT, no CGT, no income tax, no legalities of landlord life...

Interesting!

Is it legally viable, and does it protect the interests of all parties?

Mojisola

Anntay550 said:

AdrianC said:

If the intention is for the daughter to eventually buy the property, and there is no urgent pressing need for cash, then surely the best solution is for the property to be transferred straight to her name from the estate, with an agreement to repay the value of the bequest to the beneficiaries of the will over time - in effect, a private mortgage.

Then, when she's in a position to borrow, she can remortgage commercially and repay the family debt...?

No SDLT, no CGT, no income tax, no legalities of landlord life...

Interesting!

Is it legally viable, and does it protect the interests of all parties?

Not if it's done through a deed of variation - that would be a gift to her.

It could be done as a private loan from the three beneficiaries - they can put a charge on the house to protect their money.

Best if the agreement was written by a solicitor.

Anntay550

 Am I right to assume that the legal agreement would include some kind of repayment scheme or stipulation that a commercial mortgage be taken out when possible.
My daughter has other siblings and we would want to be seen to be fair to them

Grabs39

Yes, you could effectively lend her the money to buy the house and she pays it back to you monthly, or all at once when she gets a normal mortgage loan.  You place a charge on the property until such time as you are all satisfied she has paid what’s owed.  You can get a solicitor to draw up the contract and lodge the charge with the land registry.  

AdrianC

Anntay550 said:

 Am I right to assume that the legal agreement would include some kind of repayment scheme or stipulation that a commercial mortgage be taken out when possible.
My daughter has other siblings and we would want to be seen to be fair to them

It doesn't have to.

Whatever parity you want to formalise is up to you and the other siblings to agree.

Anntay550

Thank you, that’s very interesting.
May I ask ,what would be the tax implication on the repayments?

AdrianC

Anntay550 said:

Thank you, that’s very interesting.
May I ask ,what would be the tax implication on the repayments?

There's no tax payable on the capital repayments.

If you charge interest, income tax would be payable on that.

Anntay550

I can’t quite get my head round how it would work if my daughter was to get a commercial mortgage later down the line. The funds from the commercial mortgage would be paid to my brothers and I, and presumably the monthly payments already made will be deducted from the amount received? That is, the commercial mortgage will be for a lesser amount than the original loan depending on the payments already made?
Is that right?

Anntay550

AdrianC said:

There's no tax payable on the capital repayments.

If you charge interest, income tax would be payable on that.

Thank you

AdrianC

Anntay550 said:

I can’t quite get my head round how it would work if my daughter was to get a commercial mortgage later down the line. The funds from the commercial mortgage would be paid to my brothers and I, and presumably the monthly payments already made will be deducted from the amount received? That is, the commercial mortgage will be for a lesser amount than the original loan depending on the payments already made?
Is that right?

Obvs, yes.

She borrows £100k.
She repays £10k over the course of time. She still owes £90k.
She remortgages... she borrows £90k, which repays the previous lender.

The fact you're the previous lender, rather than a commercial lender, makes no difference.