Unusual mortgage situation please help

RipleyG

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

silvercar

RipleyG said:

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

To be accurate, it was only registered in 2022? Where was it registered? If as a default on a credit file or worse as a charge on the property.

Parents do things for all kinds of reasons, they may have thought it secured a home for the family that they otherwise wouldn’t have been able to get. Plus, they have now cleared the mortgage, so they haven’t created any debts from that.

silvercar

So now we have a property going from 120k to 220k that you lived in for 4 years and possibly own with just your father.

You would be exempt for the time it was your home and the last 9 months of ownership, so if you take your name off the deeds in 2025, you have a period of ownership lasting 23 years and exemption for  4yrs 9 months = 4.75 yrs. all calculations are actually done in months,  but this gives you an idea. So you take the current value less the cost in 2002, less buying costs for the base figure, let’s call this 220-120- costs of 10k= 90k gain. Assume you had joint ownership with your father, so your share is half - 45k. Then take 18.25/ 23 = 79.3% of that. So 90/ 2 x 79.3% = 45 x 79.3 % =35.7k taxed at 18% or 28% or a combination depending on your own tax situation. Worst case, if you are already a higher rate tax payer is that the CGT bill is all at 28% is nearly 10k. If you aren’t a higher rate tax payer, some of it will be at 18% so the final figure lower.

I still think hmrc MAY accept that you weren’t the beneficial owner, but I don’t know how you get their opinion on that in advance. If you did get their acceptance, then you retain your first time buyer status for stamp duty and don’t have CGT.

Cheryl2022

RipleyG said:

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

The default was registered in 2022 but they took the loan out back in 2008 

Cheryl2022

silvercar said:

RipleyG said:

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

To be accurate, it was only registered in 2022? Where was it registered? If as a default on a credit file or worse as a charge on the property.

Parents do things for all kinds of reasons, they may have thought it secured a home for the family that they otherwise wouldn’t have been able to get. Plus, they have now cleared the mortgage, so they haven’t created any debts from that.

It's on as a default on my credit file not a charge 

QrizB

Per OP's other thread, OP owns 1/2 of the property not 1/3 - mother isn't included as an owner.

https://forums.moneysavingexpert.com/discussion/comment/81620479/#Comment_81620479

ian1246

RipleyG said:

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

By "seeing the worst in a situation" I presume you mean the OP's parents making them liable for the £16,000 unpaid debt when they were 24 years old?  Or how about the £1000's of inheritance tax liability they will now have to pay to get off the deeds (or stay on the deeds & face 2nd home stamp duty). What about the poorer access to credit the OP's going to face as a result of the parents defaulting on the unsecured loan? Even a 1% higher interest rate (vs. Individuals with no defaults) can cost the 1000's of £££ extra a year - as an example, a 1% higher interest rate on a £200,000 mortgage would be £2000 every year, for as long as it takes for the default to fall off their record.

Let's not forget the loss of LISA allowances or first time stamp duty - and no, it doesn't matter that LISA & First time Stamp Duty rates didn't exist back then - the parents have still exploited the OP's young age and familiar ties, resulting in subsequent losses to the OP worth 10's of £1000's.

About the only thing which would make this even worse will be if the parents then charged the OP rent whilst they lived there (baring in mind OP legally owns 50% of the house!).

silvercar

ian1246 said:

RipleyG said:

ian1246 said:

 And what of the unsecured loan which the OP knows little of, yet which has been defaulted on?

That implies at best the OP's parents have taken advantage of comparatively young age / inexperience and at worst, demonstrated gross incompetence by failing to pay back their debt - negatively impacting the OP. 

The OP say they were 18 years old when the mortgage started in 2002, and that the loan was taken 20 years later in 2022 - when they would have been 38 years old.

However, if you're determined to see the worst in situations, it's likely you'll continue to do so regardless of my response. 

By "seeing the worst in a situation" I presume you mean the OP's parents making them liable for the £16,000 unpaid debt when they were 24 years old?  Or how about the £1000's of inheritance tax liability they will now have to pay to get off the deeds (or stay on the deeds & face 2nd home stamp duty). What about the poorer access to credit the OP's going to face as a result of the parents defaulting on the unsecured loan? Even a 1% higher interest rate (vs. Individuals with no defaults) can cost the 1000's of £££ extra a year - as an example, a 1% higher interest rate on a £200,000 mortgage would be £2000 every year, for as long as it takes for the default to fall off their record.

Let's not forget the loss of LISA allowances or first time stamp duty - and no, it doesn't matter that LISA & First time Stamp Duty rates didn't exist back then - the parents have still exploited the OP's young age and familiar ties, resulting in subsequent losses to the OP worth 10's of £1000's.

About the only thing which would make this even worse will be if the parents then charged the OP rent whilst they lived there (baring in mind OP legally owns 50% of the house!).

Some of this is unfair. You can’t expect the parents to know future tax rule changes. The parents may have thought they were doing some very efficient inheritance tax planning, if they never sell then there will be no CGT and the daughters half  won’t be in the parents’ estate.

We also don’t know the purpose of the loan, it may have been to increase the value of the property through an extension or improvements.

With one default on your record, a mortgage will still be possible. Time to compare the excess SDLT with the CGT liability to decide the best way forward.

Cheryl2022

If I take my name off the deeds therefore just leaving my dad on there and he keeps the house will I still be liable for CGT? 

silvercar

Cheryl2022 said:

If I take my name off the deeds therefore just leaving my dad on there and he keeps the house will I still be liable for CGT? 

Unfortunately, that is exactly how it works. You have a gain on the current value compared to when you bought it. See my previous post for the calculation. If you take your name off the deeds you are selling your dad your half. Even if it is a gift, as you are close relatives the revenue considers you to be connected parties and therefore the transaction is assumed to be at market rates.

as I said before you could try and convince the revenue that you were on the deeds in name only and the purpose was just for your dad to get the mortgage. Not sure how easy that would be.

There is an argument that half a house is not worth half the value of a whole house, as you can’t sell half a house on the open market. I’ve seen 90% full value bandied around. So you could value your hand now as less than half the 220 current value, so around 100k rather than 110k. That will reduce the gain, because your purchase price is fixed.