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Buying property for son while living abroad

2

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  • xylophone
    xylophone Posts: 44,387 Forumite
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    Your divorce is now final.

    There was no former marital home - you rented as you were so frequently abroad?

    Your non resident parent has arranged a mortgage( from a UK institution?) and is in the process pf buying a property ( which he will own in his sole name) and he will let to you?

    You will pay him rent?

    Your father needs to check on whether his mortgage is a BTL mortgage.

    He will be your landlord.

    https://england.shelter.org.uk/housing_advice/private_renting/landlord_responsibilities

    https://www.gov.uk/guidance/paying-tax-on-rent-to-landlords-abroad
  • cts_casemod
    cts_casemod Posts: 272 Forumite
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    My father will have a mortgage, but not UK based. It will be provided by his own bank and secured on his property. He wont be needing a BTL.

    On that sense, payment terms are between us and having a tenancy was considered just for extra protection on my side (maybe I don't even need it?)

    What I want to understand is whenever the investment and repayment to a foreign bank generate any sort of tax implication (other than stamp duty) and likewise when the property is sold. The rental income will be below the threshold of 100/wk
  • xylophone
    xylophone Posts: 44,387 Forumite
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    Your non resident parent is obtaining a loan from a non resident bank and using it to buy a property in the UK.

    He will pay stamp duty as appropriate.

    Presumably he will be making the repayments from his non resident bank account to the non resident lender?


    The property will be in his sole name and you will be living in it.

    He is therefore your landlord and will need to comply with a landlord's responsibilities.

    Re sale

    https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property
  • cts_casemod
    cts_casemod Posts: 272 Forumite
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    xylophone wrote: »
    Your non resident parent is obtaining a loan from a non resident bank and using it to buy a property in the UK.

    He will pay stamp duty as appropriate.

    Presumably he will be making the repayments from his non resident bank account to the non resident lender?


    The property will be in his sole name and you will be living in it.

    He is therefore your landlord and will need to comply with a landlord's responsibilities.

    Re sale

    https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

    Would you help me understand what triggers the requirement for him to be a landlord? Is it generated by the mortgage, the law or something else?

    I'm clear regarding the stamp duty and the higher tax on earnings when the property is sold.
  • Slithery
    Slithery Posts: 6,046 Forumite
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    You would be paying to live in a property that you don't own, and the owner wouldn't be resident - so you have a landlord/tenant relationship.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    cts_casemod wrote: »
    Would you help me understand what triggers the requirement for him to be a landlord? Is it generated by the mortgage, the law or something else?

    I'm clear regarding the stamp duty and the higher tax on earnings when the property is sold.

    You pay money in exchange for exclusive occupation of the property. It doesn't matter if the agreement is in writing or not, if it isn't it will automatically be a Contractual Periodic Tenancy. It doesn't matter what you call the money you pay to him, legally it will be rent.

    This all seems a very complicated way of buying a property and not very tax efficient at all. Setting up a trust or having you as the beneficial owner and your father as the legal owner won't protect you from future divorces because the trust or your beneficial interest will still be your assets.

    Wouldn't it be easier, and more tax efficient, for your father to lend you the money to purchase the property yourself with a private mortgage agreement between the two of you? Then to protect yourself against divorces just don't get married. If you co-habit with someone do not ask them to contribute towards the mortgage payments or material changes to the property such as fitting a new kitchen or funding a loft conversion, or if leasehold don't ask them to contribute towards a lease extension.
  • agrinnall
    agrinnall Posts: 23,344 Forumite
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    Pixie5740 wrote: »

    Wouldn't it be easier, and more tax efficient, for your father to lend you the money to purchase the property yourself with a private mortgage agreement between the two of you?


    That's what I originally thought. But now we know that the OP's father will need a mortgage to buy the property I doubt very much if the lender will allow the money to be handed over to a third party with no security for them.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    agrinnall wrote: »
    That's what I originally thought. But now we know that the OP's father will need a mortgage to buy the property I doubt very much if the lender will allow the money to be handed over to a third party with no security for them.

    I think the father is remortgaging his own house to release equity to then buy the property the OP will live in....at least that's how I read it.
    cts_casemod wrote: »
    My father will have a mortgage, but not UK based. It will be provided by his own bank and secured on his property. He wont be needing a BTL.
  • bris
    bris Posts: 10,548 Forumite
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    Pixie5740 wrote: »
    I think the father is remortgaging his own house to release equity to then buy the property the OP will live in....at least that's how I read it.
    That would make it a cash purchase and not the way I read it.


    Using your own home as security is common for lenders to want under many different circumstances.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    bris wrote: »
    That would make it a cash purchase and not the way I read it.


    Using your own home as security is common for lenders to want under many different circumstances.

    Well I read it differently, perhaps the OP could clarify.

    It seems odd to me that a mortgage lender outside of the UK would secure a loan on a property outside the UK but it's the UK property that would actually be mortgaged. I'm not saying it's impossible it just sounds strange.
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