Let to Buy Advice - Is this even possible?!

pluginbaby86

Hello, and as this is my first ever post I apologise if I have put this in the wrong place. I have long read the advice on here but never sought any myself!

To give you an idea of our circumstances, I live in Derbyshire with my Wife and young Daughter, but originally come from Burnley, Lancashire. My parents are approaching retirement, with intention to do so at the start of 2024 (Currently on 3 days a week as they're in their mid-late 60's). Me and my Wife have around £90,000 left on our mortgage (valued at £210,000), my parents was paid off many moons ago (valued at 280,000). I am an only child.

My parents have long wanted to move to our town as they retire, to be closer to me should there be any health issues etc, and (predominantly) to see more of their granddaughter as she grows up. The 'plan' my parents have hatched (which on paper sounds great, but I am sure has some pitfalls - hence coming here for opinion!) is that they want to rent our current house off us, and gift us the equity we have in our house in cash out of their house sale for us to use as a deposit on a bigger house, with them becoming tenants in our current house (and slowly paying the remaining mortgage off it). The reason they wish to do this is as opposed to buying something local is borne from their own experiences of inheritance tax from when my grandparents passed, and they believe this is a good way of getting two houses in me and my wife's name.

I hope that all makes sense, it seems really convoluted when I type it out but we have had this chat many times (with my parents already talking about the fact they're going to build a conservatory etc!) without really approaching the topic of whether it's actually practical and something that's even possible. We have long realised we would need to get mortgage advice on this, but I thought before anything more formal I would check if anyone on here has done anything similar before at all, or tried! I assume it's classed as a 'Let to Buy' but the fact it's my parents surely is classed as a risk, so I would think that is a sticking point.

Thanks for any help or advice that anyone can provide, it's really appreciated.

_Penny_Dreadful

pluginbaby86 said:

Hello, and as this is my first ever post I apologise if I have put this in the wrong place. I have long read the advice on here but never sought any myself!

To give you an idea of our circumstances, I live in Derbyshire with my Wife and young Daughter, but originally come from Burnley, Lancashire. My parents are approaching retirement, with intention to do so at the start of 2024 (Currently on 3 days a week as they're in their mid-late 60's). Me and my Wife have around £90,000 left on our mortgage (valued at £210,000), my parents was paid off many moons ago (valued at 280,000). I am an only child.

My parents have long wanted to move to our town as they retire, to be closer to me should there be any health issues etc, and (predominantly) to see more of their granddaughter as she grows up. The 'plan' my parents have hatched (which on paper sounds great, but I am sure has some pitfalls - hence coming here for opinion!) is that they want to rent our current house off us, and gift us the equity we have in our house in cash out of their house sale for us to use as a deposit on a bigger house, with them becoming tenants in our current house (and slowly paying the remaining mortgage off it). The reason they wish to do this is as opposed to buying something local is borne from their own experiences of inheritance tax from when my grandparents passed, and they believe this is a good way of getting two houses in me and my wife's name.

I hope that all makes sense, it seems really convoluted when I type it out but we have had this chat many times (with my parents already talking about the fact they're going to build a conservatory etc!) without really approaching the topic of whether it's actually practical and something that's even possible. We have long realised we would need to get mortgage advice on this, but I thought before anything more formal I would check if anyone on here has done anything similar before at all, or tried! I assume it's classed as a 'Let to Buy' but the fact it's my parents surely is classed as a risk, so I would think that is a sticking point.

Thanks for any help or advice that anyone can provide, it's really appreciated.

Unless your parents have a lot of other assets then they are nowhere near the IHT threshold. What they are doing is ensuring you pay the higher rate of SDLT when you buy your new home and a potential CGT bill in the future. As far as tax avoidance ideas go it’s guaranteed to achieve the opposite. 

That’s before you get into requiring a regulated LTB/BTL mortgage product to let to family. 

GDB2222

The IHT threshold is £325k per person. Double that for a couple. Plus, extra if there’s a house involved, up to £1m.

Unless they are near/over that, there’s no reason to do anything clever. Even then, it’s much, much easier to give away non-house assets than mess around in the way suggested. 

Lots of problems with the plan, as penny says. 

pluginbaby86

Thankyou both - already saving me the embarrassment of proposing anything like this to a mortgage advisor by asking here!

The main consideration is that my parents want to move here for both the here and the future in terms of ease of dealing with anything health wise/passing in the future, and spending lots more time with us so that we're not 3 hours apart really. I guess the simplest solution (i.e, selling up and buying a house here) is the one to be followed in that case?

GDB2222

pluginbaby86 said:

Thankyou both - already saving me the embarrassment of proposing anything like this to a mortgage advisor by asking here!

The main consideration is that my parents want to move here for both the here and the future in terms of ease of dealing with anything health wise/passing in the future, and spending lots more time with us so that we're not 3 hours apart really. I guess the simplest solution (i.e, selling up and buying a house here) is the one to be followed in that case?

Yes. Keep it simple.

_Penny_Dreadful

As above, keep it simple.

p00hsticks

pluginbaby86 said:

I guess the simplest solution (i.e, selling up and buying a house here) is the one to be followed in that case?

But if they genuinely like the house you are currently living in, and you are genuinely looking to upsize, there is nothing to stop you selling your house to them.....

pluginbaby86

p00hsticks said:

pluginbaby86 said:

I guess the simplest solution (i.e, selling up and buying a house here) is the one to be followed in that case?

But if they genuinely like the house you are currently living in, and you are genuinely looking to upsize, there is nothing to stop you selling your house to them.....

Yes, this may well be the best possible outcome, had crossed my mind

UnderOffer

Do you actually want to move? If you are happy in the home you have then your parents just need to sell their current home in Lancashire and find a suitable house for their requirements (bungalow?) to suit their ageing years near you in Derbyshire. Much more straightforward and check they have a Will in place to reduce any future issues. 

pluginbaby86

UnderOffer said:

Do you actually want to move? If you are happy in the home you have then your parents just need to sell their current home in Lancashire and find a suitable house for their requirements (bungalow?) to suit their ageing years near you in Derbyshire. Much more straightforward and check they have a Will in place to reduce any future issues. 

Yes we do, house is a 3 bed semi and is beyond full since we had our daughter. I think the combination of both families needing to move (for different reasons) led us to all of the strategising of how best to do this