Buying parents house

[Stupeo]

My parents have re-located and their house is currently sat empty. They are trying to rent it out and sell it but would prefer to sell it.

The house has been valued at £170Kish but they would be happy to sell it for around £120-130,000.

The unfortunate thing is we've just recently purchased our first home so i've no cash for a deposit to go down the traditional purchase route.

Is there anyway I could get a mortgage on the property without a deposit? Taking into account the fact that they are willing to discount it £50,000K??

[anonymous-user]

Whether you can get a mortgage would depend mainly on your ability to pay it. The fact that you would be borrowing less than you think the house is worth would help. It will also depend on whether you are planning to live in it or rent it out.

If you are planning to rent the house out rather than live in it then the discount your parents are giving you would also mean there is likely to be a bigger capitals tax bill than you would otherwise expect when you come to sell it.

Beware that there is a chance that HMRC may take an interest if they feel that the house has been sold for below market value.

[Stupeo]

OK thanks.

I would be looking to rent it out.

The mortgage repayments are not a problem, even of the house was sat empty we could comfortably afford it.

[Sarnie]

Stupeo said:

OK thanks.

I would be looking to rent it out.

The mortgage repayments are not a problem, even of the house was sat empty we could comfortably afford it.

Under market value transactions are a big no no, and will attract attention from HMRC, especially if your trying to sneak it under Stamp Duty thresholds.

The only way of doing this would be your parents to 'gift' you the deposit. So you would purchase the property at £170k from your parents, and they would gift you the deposit and you would then get the required mortgage. This can only be done with direct immediate family and is not acceptable to all lenders. This would also need to be a BTL mortgage as you'd be renting it out.

Drop me a PM if you'd like some help or advice with this?

[Stupeo]

Thanks Sarnie.

I am going to speak to them first to see exactly what they are willing to do.

I will drop you a PM when I have spoken to them.

Matt

[wattsm666]

Sarnie said:

Under market value transactions are a big no no, and will attract attention from HMRC, especially if your trying to sneak it under Stamp Duty thresholds.

The only way of doing this would be your parents to 'gift' you the deposit. So you would purchase the property at £170k from your parents, and they would gift you the deposit and you would then get the required mortgage. This can only be done with direct immediate family and is not acceptable to all lenders. This would also need to be a BTL mortgage as you'd be renting it out.

Drop me a PM if you'd like some help or advice with this?

If the house was a PPR then there shouldn't be any capital gains tax issues, so the market value aspect will only apply to stamp duty.

There might be IHT implications though.

[Deva Link]

Sarnie said:

Under market value transactions are a big no no, and will attract attention from HMRC, especially if your trying to sneak it under Stamp Duty thresholds.

There's someone on here who's just bought a house at a similar kind of discount to asking price that the OP is talking about.

[mudster]

wattsm666 said:

Sarnie said:

Under market value transactions are a big no no, and will attract attention from HMRC, especially if your trying to sneak it under Stamp Duty thresholds.

The only way of doing this would be your parents to 'gift' you the deposit. So you would purchase the property at £170k from your parents, and they would gift you the deposit and you would then get the required mortgage. This can only be done with direct immediate family and is not acceptable to all lenders. This would also need to be a BTL mortgage as you'd be renting it out.

Drop me a PM if you'd like some help or advice with this?

If the house was a PPR then there shouldn't be any capital gains tax issues, so the market value aspect will only apply to stamp duty.

There might be IHT implications though.

There will be CGT implications when the op comes to sell which is the topic of wattsm66 post.It's not being purchased from the parents to be used as a PPR (it's going to be rented out) so the op would be liable for CGT.

And if it's sold at a knock down price the op will have a greater CGT liability.

[Tony427]

Would it be possible for OP and parents to set up a Ltd Company to rent the house out. Parents put house into company as a Directors Loan valued as required.

House is rented out and then company obtains mortgage on the now rented house using lease as means of payment.

Parents are then paid back the value of the original Directors loan used to start the company.

Shareholding of company can then be adjusted following this to suit requirements.

I'm not a lawyer or tax accountant but would this work ?

Cheers,

Tony