Stamp Duty implications for inheriting property with equity release

DaveSmith2020

My late father's property had a sizeable equity release mortgage on it of about £300K. The property itself is probably worth about £700K. I am considering my options of what to do. One of these is to get a bridging loan, after probate is granted, to pay off the £300K equity release mortgage, so that it buys me some time to complete some house renovations. So, I asked ChatGPT for some answers on if stamp duty would be due if I took this route, and it gave me a choice of two answers: Yes, and No! This confused me even more.

So, does anyone here know if there are stamp duty to pay if I get a bridging loan to pay off the equity release company after probate has been granted?

RAS

Providing it's basically water tight, has some sort of kitchen and some sort of bathroom then the estate/you are unlikely to recoup any money you spend on refurbishments.  Better financially decluttered and sold as seen.

Unless you intend moving in yourself and will need a mortgage?

Keep_pedalling

Frankly I think you would be mad to take out a very expensive loan then spend a load more money on renovations, when you might not even get back the money spent let alone turn a profit especially if any uplift leaves you with a CGT liability. 

As for your question there would be no stamp duty as you have inherited the whole house and would be paying off the loan rather than buying a percentage of the house from the ER company. 

DaveSmith2020

Keep_pedalling said:

Frankly I think you would be mad to take out a very expensive loan then spend a load more money on renovations, when you might not even get back the money spent let alone turn a profit especially if any uplift leaves you with a CGT liability. 

As for your question there would be no stamp duty as you have inherited the whole house and would be paying off the loan rather than buying a percentage of the house from the ER company. 

That is something I am not understanding fully. If I paint the inside of the house, and the exterior, then CGT kicks in if the house increases in value slightly?

DaveSmith2020

RAS said:

Providing it's basically water tight, has some sort of kitchen and some sort of bathroom then the estate/you are unlikely to recoup any money you spend on refurbishments.  Better financially decluttered and sold as seen.

Unless you intend moving in yourself and will need a mortgage?

I am living in the property, since I was my fathers carer. One of my concerns is that the equity release company will want to kick me out of there.

I would need a bridging loan to buy time to renovate, or avoid a fast sale. For example, if the equity release company has a short timeframe to repay the debt, they may inside on an auction, and that would mean I get a poor price for the property.

tls123

You have inherited the estate surely the equity release won’t release its legal charge over the deeds until it’s paid off. It’s unlikely you would be able to get a loan to pay it off if it’s 300k the loan would be eyewateringly expensive. Are you executor? 

DaveSmith2020

tls123 said:

You have inherited the estate surely the equity release won’t release its legal charge over the deeds until it’s paid off. It’s unlikely you would be able to get a loan to pay it off if it’s 300k the loan would be eyewateringly expensive. Are you executor? 

Yes, I am the executor. The equity release mortgage is eyewateringly expensive already, so really we are talking about the difference in the cost between a bridging loan and the cost of the equity release mortgage.

Is there any reason you think I would be unlikely to get a loan to pay it off?

Keep_pedalling

DaveSmith2020 said:

Keep_pedalling said:

Frankly I think you would be mad to take out a very expensive loan then spend a load more money on renovations, when you might not even get back the money spent let alone turn a profit especially if any uplift leaves you with a CGT liability. 

As for your question there would be no stamp duty as you have inherited the whole house and would be paying off the loan rather than buying a percentage of the house from the ER company. 

That is something I am not understanding fully. If I paint the inside of the house, and the exterior, then CGT kicks in if the house increases in value slightly?

If that is all you are doing then I don't see a problem, how far down the road are you with probate? You can’t sell the property until you have that so if the death was recent you have time to add a lick of paint while waiting for probate. The ER won’t be demanding their money while you are applying for probate or when you are actively marketing unless that stage drags on.

tls123

Doesn’t a bridging loan require a charge on a property especially if your borrower inc 300k if there’s an equity release on existing property I would be very careful as unless you know what you are doing I don’t think it would be that easy to get such a loan. Equity release company’s normally allow time for a sale once the grant is through so as other poster said time to do up property get ready for market, they unlikely to immeadiately force you out but a call to the equity company to confirm their procedures timescales would help you put your mind at ease if your worried about losing your home

DaveSmith2020

Just a quick update to say that the equity release company has given me 18 months from date of death to sell the property. That changes everything.

poseidon1

DaveSmith2020 said:

Just a quick update to say that the equity release company has given me 18 months from date of death to sell the property. That changes everything.

Well yes it does give you alot of time to apply 'a lick of paint' to strategic areas of the property as you originally planned.

 However are you certain a  superficial spruce up will achieve a noticeably better price or make it measurably easier to sell?

You did point out that the ER loan is 'eye-wateringly expensive, do you really want to give the lender up to 18 months more interest at such high rates? Clearly they are more than comfortable with the prospect, but that cost would eat it to your 'profit' the longer matters drag on.