Complicated First Time House Byer- Please help!

Carolyn61085

Hi, Can someone help?

My partner and I are planning to move in together this year. His father inherited a house last year and has agreed to gift it to the two of us if we take out a mortgage to pay some of the money to him and my partner's sister. He wants us to give them £160,000 so in effect, we will own £90,000 of the house which is worth c250k.

What kind of mortgage should I be looking for and will the gifting affect any mortgage we can get - it will be subject to inheritance tax if his father dies before 7 years is up?

I also, like many other young people (i'm 22) had debts to the sum of £6000. I have 2 satisfied CCJ's (satisfied 6 months ago) and and 2 defaulted credit agreements. Every penny I owed has been paid back for over 4 months now and the accounts which still exist i.e. credit card, catalogue are in credit by a few pounds each but have not been used for close to a year. My partner has never had any credit except a mobile phone contract which he has had for around a year.

How will this affect our mortgage and will we still be able to get a good deal?

Any advice greatly appreciated!

mrs_deadline

My advice is to slow down and take things one step at a time. Normally you explore how much a lender is prepared to advance you before even looking at houses in your price range.

This arrangement may or may not be in your best interests - but it stretches the definition of a gift somewhat, saddling yourselves with quite so much debt to give your partner's relatives a payout.

Maybe partner's dad could sell up himself and give everyone their share. Then your partner has a deposit to put down on the place of your choice, when you are ready to buy?

merlinthehappypig

If your partner's father is gifting you the property, then you will own it all, presumably. He will no longer have any interest in it. You will own a house that is worth £250000, but with a mortgage of £160000.

Is that correct?

If it is there are a few things to check.

Firstly, that the house is actually worth what you think. Valuers are erring on the side of caution at present and you might get a bit of a shock.

Secondly, in your case, you need to do things correctly to protect any investment that you, personally, make. You aren't married and if anything goes wrong with the relationship you need to ensure that your interests are protected. I'd take independent legal advice.

As far as Inheritance Tax is concerned the 7 years is the time that needs to elapse before the gift giver dies to ensure that the gift is free from IHT. After this time the gift is free from IHT.

As far as a mortgage is concerned it needn't affect things hugely. Your recent CCJ's are bound to count against you and you won't get the best deals that are around, but consult a good whole of market broker and you should be o.k.

The bank won't be bothered who is selling you the house. Where it might affect you is the lack of deposit unless you explain the situation fully.

I'd see a decent broker and explain the whole situation and see what they say.

Whatever you do, as the post above says, don't rush in. It might seem like a good deal, but if you can't afford the mortgage you might lose the lot.