Best advice whether to sell property to clear debt

beckysbobbles12

Hi all

I know this might seem like a personal decision but I think it's always handy to hear other peoples opinions.

My husband has a property that he rents out. We live together in my property. These have been kept separately. I don't want to get into the whole if we divorce business as hopefully it'll never happen.

He isn't the best with money. It's not that he spends loads, it's just he doesn't know when to save and has quite high outgoings compared to income (he has three other children to support).

He said he's considering selling his property so he can clear his debt. It would clear his mortgage, plus a loan I got out for him and then leave around £100k.

I've suggested he invests some of that in stocks and shares ISAs. 

The purpose of the house was just to have something to leave his kids in the future but I've explained life is for living, not struggling so hopefully without the mortgage it should help him out.

Although saying that the current rent he receives covers the mortgage and tax so he's flat on that.

I guess I'm just wondering what you'd do in his situation. I don't really have an opinion either way. 

retiredbanker1

Have you factored in capital gains tax should he sell the property?

redrosebud

How much is the debt, and what's the alternative route to clearing it if he doesn't sell the property?

grumbler

beckysbobbles12 said:

Although saying that the current rent he receives covers the mortgage and tax so he's flat on that.

 

Covers mortgage interest or mortgage payments? If it's the latter, then he's building equity in the house, i.e. sort of growing his savings. Will this still be the case if he remortgages the house in order to repay the loan(s)?

beckysbobbles12

retiredbanker1 said:

Have you factored in capital gains tax should he sell the property?

No because it's rented to a family member so no CGT to pay.

robber2

To be exempt from CGT the tennant needs to be a DEPENDANT relative.  What will they do when the house is sold?

Caz3121

beckysbobbles12 said:

retiredbanker1 said:

Have you factored in capital gains tax should he sell the property?

No because it's rented to a family member so no CGT to pay.

do they meet the criteria? - been living there more than 35 years?

Who is classed as a dependent relative?

HMRC's guidance is lengthy on what constitutes a dependent relative and what does not. Broadly, a dependent relative is defined as any relative who is incapacitated by old age or infirmity from maintaining himself or herself, and extends to a mother who is not incapacitated, but is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.

In what situation can the relief be claimed?

Dependent relative relief from CGT is only available on a property where the occupation of that dependent relative commenced prior to 5 April 1988 and that property must have been the main residence of the dependent relative.

https://www.lexology.com/library/detail.aspx?g=00653296-1535-41ea-bf77-74f44a54b8ab

purdyoaten2

beckysbobbles12 said:

retiredbanker1 said:

Have you factored in capital gains tax should he sell the property?

No because it's rented to a family member so no CGT to pay.

Unless it was his main residence at some point he would be liable to CGT on the sale price less purchase price less costs of buying and selling less improvement costs. (I presume that the property was not purchased prior to 31st March 1982?)

As others have said DR relief was abolished on 5th April 1988.