Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Smth
    • By Smth 16th Apr 19, 8:48 PM
    • 2Posts
    • 1Thanks
    Smth
    Buying a house from parents
    • #1
    • 16th Apr 19, 8:48 PM
    Buying a house from parents 16th Apr 19 at 8:48 PM
    Hello

    My parents bought a house a few years ago. They bought it outright so thereís no mortgage. Iíve been living there for a while. We now have inheritance money in the family and my dad has offered to give me the house so I have somewhere with no mortgage. Using my inheritance money, Iím going to buy the house off them for the amount they paid for it.

    Obviously Iím assuming itís a relatively straightforward process, but I know Iíll have to go through a solicitors and get the paperwork signed. As I havenít bought property before, Iím a little unsure about the process and how much it should cost in solicitor fees.

    If anyone has any advice or information that would be greatly appreciated.

    Thank you!
Page 1
    • AnotherJoe
    • By AnotherJoe 16th Apr 19, 9:01 PM
    • 13,480 Posts
    • 15,937 Thanks
    AnotherJoe
    • #2
    • 16th Apr 19, 9:01 PM
    • #2
    • 16th Apr 19, 9:01 PM
    The main issue will be capital gains tax.
    As they are selling to a "connected person" and they have not been living there (I think, from what you've written?) the sale is treated as though they sold it to you at market price.
    So lets say they bought it for £50k and its now worth £450k and they sell it to you for £50k. That is treated as if they sold it for £450k (even if just £50k changes hands) which means £400k capital gains (minus various allowances for time they lived there, if any, and so on)
    That could be a fair chunk of money. Maybe £100k in tax or so? You probably need to see a specialist to explore ways to minimise that. It be simpler if it stays in the family and is left to you when they die, when CGT is extinguished. Though there may be inheritance to to pay. Again, you need a specialist.


    p.s. of course my numbers may be way off. If they bought it for £100k and are selling to you for £120k not really an issue)
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • macman
    • By macman 16th Apr 19, 11:43 PM
    • 43,248 Posts
    • 18,421 Thanks
    macman
    • #3
    • 16th Apr 19, 11:43 PM
    • #3
    • 16th Apr 19, 11:43 PM
    OP, you need to post the date of purchase, price paid, and current value. And the period they lived there.
    No free lunch, and no free laptop
    • Smth
    • By Smth 17th Apr 19, 12:36 PM
    • 2 Posts
    • 1 Thanks
    Smth
    • #4
    • 17th Apr 19, 12:36 PM
    • #4
    • 17th Apr 19, 12:36 PM
    Thanks for the replies.

    They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
    They havenít lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. Theyíve already paid inheritance tax on my grandparentís trust so thereís not loads left.
    • p00hsticks
    • By p00hsticks 17th Apr 19, 1:00 PM
    • 6,832 Posts
    • 7,460 Thanks
    p00hsticks
    • #5
    • 17th Apr 19, 1:00 PM
    • #5
    • 17th Apr 19, 1:00 PM
    my dad has offered to give me the house so I have somewhere with no mortgage. Using my inheritance money, Iím going to buy the house off them for the amount they paid for it.
    Originally posted by Smth
    They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
    Originally posted by Smth

    So your father isn't actually giving you anything, other than the option to buy the property for (possibly slightly more than) the current market value ?
    • AnotherJoe
    • By AnotherJoe 17th Apr 19, 1:04 PM
    • 13,480 Posts
    • 15,937 Thanks
    AnotherJoe
    • #6
    • 17th Apr 19, 1:04 PM
    • #6
    • 17th Apr 19, 1:04 PM
    Thanks for the replies.

    They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
    They havenít lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. Theyíve already paid inheritance tax on my grandparentís trust so thereís not loads left.
    Originally posted by Smth

    What? Why would you pay more than ist worth?!!!!
    Last edited by AnotherJoe; 17-04-2019 at 1:06 PM.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • middleclassbutpoor
    • By middleclassbutpoor 17th Apr 19, 1:37 PM
    • 612 Posts
    • 550 Thanks
    middleclassbutpoor
    • #7
    • 17th Apr 19, 1:37 PM
    • #7
    • 17th Apr 19, 1:37 PM
    Thanks for the replies.

    They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
    They havenít lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. Theyíve already paid inheritance tax on my grandparentís trust so thereís not loads left.
    Originally posted by Smth
    A financial adviser should have considered the capital gain of the asset and done all the calcs to determine that was the best route with the full knowledge of your parents circumstances.
    • getmore4less
    • By getmore4less 17th Apr 19, 1:47 PM
    • 35,517 Posts
    • 21,715 Thanks
    getmore4less
    • #8
    • 17th Apr 19, 1:47 PM
    • #8
    • 17th Apr 19, 1:47 PM
    If same price or less no CGT.

    I would be sceptical about the IHT situation as well.

    Passing your inheritance back upto your parents just gives them more money to be paying IHT on if they die.
    • Keep pedalling
    • By Keep pedalling 17th Apr 19, 2:45 PM
    • 6,280 Posts
    • 7,257 Thanks
    Keep pedalling
    • #9
    • 17th Apr 19, 2:45 PM
    • #9
    • 17th Apr 19, 2:45 PM
    Thanks for the replies.

    They bought it August/September 2016 for £130,000. Other similar properties in the area are going for slightly less now.
    They havenít lived there. Just me and my partner. My dad has consulted his financial advisor who suggested me buying it off him as the easiest way to do it, as just putting the house in my name means I have to pay inheritance if my dad passes away in the next seven years. Theyíve already paid inheritance tax on my grandparentís trust so thereís not loads left.
    Originally posted by Smth
    That makes no sense. If you pay him for the house and he dies in the next 7 years unless he blows the lot his estate will just have a lot of extra cash to pay tax on instead of a gifted house, and will still have to pay it if he lives for 7 years or more.

    The better option would be for him to gift you the property, and take out term insurance to cover the IHT that an early death might bring.

    I think he needs a new financial advisor.
    • middleclassbutpoor
    • By middleclassbutpoor 17th Apr 19, 4:45 PM
    • 612 Posts
    • 550 Thanks
    middleclassbutpoor
    I would also get a written valuation at any point you take ownership in case the HMRC question this at a later date.

    This valuation should be an independent RICS valuation so there can be no feeling of have you sold/bought below market value or at least 3 different EA's.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

143Posts Today

1,020Users online

Martin's Twitter
  • Have a great Easter, or a chag sameach to those like me attending Passover seder tomorrow. I?m taking all of next? https://t.co/qrAFTIpqWl

  • RT @rowlyc1980: A whopping 18 days off work for only 9 days leave! I?ll have a bit of that please......thanks @MartinSLewis for your crafty?

  • RT @dinokyp: That feeling when you realise that you have 18 days of work and only used 9 days of your annual leave! Thanks @MartinSLewis h?

  • Follow Martin