Complicated - Buying in laws house for under market value?
Discussion
Hi all, looking for some help/advice if possible.
‘In laws’ (me and partner are not married) had an interest only mortgage which is about to end and they owe 60k. They have looked into a lifetime mortgage and equity release but decided it’s not for them.
They have asked me to buy their home for 60k and they would make the repayments to me.
This would involve me getting a second mortgage or maybe a loan.
Obviously they are putting a lot of trust in me by effectively signing the house over to me for 250k under its market value and I really want to help them but I don’t know where to start with possible tax implications, stamp duty, me being a landlord? (Would I need a buy to let mortgage etc.) not to mention possible issues with deprivation of assets down the line should one of them need care etc
Any help is much appreciated.
Just to add they have spoken to an advisor about a lifetime mortgage I think but they concluded that the payments were higher than expected and there was a risk of losing equity in the house.
‘In laws’ (me and partner are not married) had an interest only mortgage which is about to end and they owe 60k. They have looked into a lifetime mortgage and equity release but decided it’s not for them.
They have asked me to buy their home for 60k and they would make the repayments to me.
This would involve me getting a second mortgage or maybe a loan.
Obviously they are putting a lot of trust in me by effectively signing the house over to me for 250k under its market value and I really want to help them but I don’t know where to start with possible tax implications, stamp duty, me being a landlord? (Would I need a buy to let mortgage etc.) not to mention possible issues with deprivation of assets down the line should one of them need care etc
Any help is much appreciated.
Just to add they have spoken to an advisor about a lifetime mortgage I think but they concluded that the payments were higher than expected and there was a risk of losing equity in the house.
The first thing in my mind: IT (or IHT... In Heritance Tax?) is the issue.
https://www.co-oplegalservices.co.uk/media-centre/...
I also googled: can i buy a house from my parents for less than market value uk
and more stuff came up that may contain relevant info.
https://www.co-oplegalservices.co.uk/media-centre/...
I also googled: can i buy a house from my parents for less than market value uk
and more stuff came up that may contain relevant info.
They can gift you the equity in the property to act as your deposit, but you will need to pay full market value for it, the solicitor will have a duty of care to ensure this and make sure the correct stamp duty is paid.....do you own a property currently? If so, you'll pay the additional rate stamp.
It's not a BTL mortgage you need as most BTL lenders would not allow you to rent the property to in-laws.
It's not a BTL mortgage you need as most BTL lenders would not allow you to rent the property to in-laws.
Sarnie said:
They can gift you the equity in the property to act as your deposit, but you will need to pay full market value for it, the solicitor will have a duty of care to ensure this and make sure the correct stamp duty is paid.....do you own a property currently? If so, you'll pay the additional rate stamp.
Sounds like they just need a 60k loan, can he just loan them the money and put a charge on the property, for future unforeseen events such as care costs, inheritance and etc?? As you say, if he actually owns the whole thing, its just more complicated (and costly)ooid said:
Sarnie said:
They can gift you the equity in the property to act as your deposit, but you will need to pay full market value for it, the solicitor will have a duty of care to ensure this and make sure the correct stamp duty is paid.....do you own a property currently? If so, you'll pay the additional rate stamp.
Sounds like they just need a 60k loan, can he just loan them the money and put a charge on the property, for future unforeseen events such as care costs, inheritance and etc?? As you say, if he actually owns the whole thing, its just more complicated (and costly)Terminator X said:
What's to stop them selling the OP the house for £1 (or £60k) and then he just pays off the £60k mortgage? Their house their choice surely.
TX.
Any tax liabilities for the OP aside, Deprivation of Assets for a start…TX.
If they need to go into a care home the local authorities look to seek all costs from the persons estate. When they conduct their financial investigation into them and discover they’ve pretty much given their house away to the OP then they will come after the OP for the house value.
Tony_T said:
ooid said:
Sarnie said:
They can gift you the equity in the property to act as your deposit, but you will need to pay full market value for it, the solicitor will have a duty of care to ensure this and make sure the correct stamp duty is paid.....do you own a property currently? If so, you'll pay the additional rate stamp.
Sounds like they just need a 60k loan, can he just loan them the money and put a charge on the property, for future unforeseen events such as care costs, inheritance and etc?? As you say, if he actually owns the whole thing, its just more complicated (and costly)Unless you have a legal document safeguarding your loan, consider what would happen if for some reason they defaulted, or if you and your partner separate. Protect any of your monies that you commit to safeguard yourself.
Personally I would think twice and consider the phrase don t mix business with pleasure
Edited by The Gauge on Monday 23 February 08:21
The Gauge said:
Nice to be able to halo family but as you aren t married be careful of effectively giving your hard earn cash to a non blood relative.
Unless you have a legal document safeguarding your loan, consider what would happen if for some reason they defaulted, or if you and your partner separate. Protect any of your monies that you commit to safeguard yourself.
Personally I would think twice and consider the phrase don t mix business with pleasure
Hi thanks for the advice. Unless you have a legal document safeguarding your loan, consider what would happen if for some reason they defaulted, or if you and your partner separate. Protect any of your monies that you commit to safeguard yourself.
Personally I would think twice and consider the phrase don t mix business with pleasure
I am very risk averse and this is already causing me a lot of stress to be honest. However, i really do want to help them out as they have been very good to me over the years and i trust them 100%.
The issue i have is arranging how to cover myself if like you say we did split up. What makes it more complicated is the loan would probably be secured against our house which me and their daughter are joint owners, so not sure how that would work?
borcy said:
How old are they? You can get normal mortgages upto 75, i think leeds building society do a normal one beyond that.
The whole thing sounds complex and covered in pitfalls if you go down this path.
I think they are 72 and 70. I don't know their income but they have been paying around £350-400 in interest payments each month. The whole thing sounds complex and covered in pitfalls if you go down this path.
Tony_T said:
The Gauge said:
Nice to be able to halo family but as you aren t married be careful of effectively giving your hard earn cash to a non blood relative.
Unless you have a legal document safeguarding your loan, consider what would happen if for some reason they defaulted, or if you and your partner separate. Protect any of your monies that you commit to safeguard yourself.
Personally I would think twice and consider the phrase don t mix business with pleasure
Hi thanks for the advice. Unless you have a legal document safeguarding your loan, consider what would happen if for some reason they defaulted, or if you and your partner separate. Protect any of your monies that you commit to safeguard yourself.
Personally I would think twice and consider the phrase don t mix business with pleasure
I am very risk averse and this is already causing me a lot of stress to be honest. However, i really do want to help them out as they have been very good to me over the years and i trust them 100%.
The issue i have is arranging how to cover myself if like you say we did split up. What makes it more complicated is the loan would probably be secured against our house which me and their daughter are joint owners, so not sure how that would work?
Does your partner understand your concerns? It s a difficult subject to talk about and can cause fallouts, all from the starting point of genuinely wanting to help people you (probably) love.
If it wasn t for your daughter potentially being affected and if you see your in-laws as your own family then one option could be to gift them the money and you all have a verbal agreement on a repayment plan.
If they are simply your partners parents and you want to protect yourself and your daughters finances then consider having an arrangement with some legal backing incase it all goes tits up.
Would they be leaving everything to your partner in their will? Not that a will is of any use if you split with your partner, or one of them dies and the survivor rewrites the will or remarries (which makes any will null and void). Plus a will can be changed at anytime, and overwritten by local authorities
Remortgaging to help someone else is a big ask and you could be left high and dry. Do you even have that much equity in your own house to allow a remortgage?
You are in a difficult situation where money and the heart collide. It could all work out in the end, but the end is a long way away and you could find yourself returning to this forum posting a new thread asking Help me get out of this financially tangled web .
Sorry to paint such a negative picture, but it s a potentially realistic one, especially as the in-laws don t seem to have even made provisions to have addressed how they were going to pay off the capital in the first place. Seems they enjoyed the period of reduced payments for the interest only years of their mortgage but not considered what happens then. Should you have to be the one that picks up the pieces for people who aren t even your relatives?
Edited by The Gauge on Monday 23 February 08:42
The Gauge said:
You rightly have your concerns, and it s good that you recognise potential pitfalls. I m certainly not saying don t help them, but continue to consider the what if s especially as your own daughter could be affected.
Does your partner understand your concerns? It s a difficult subject to talk about and can cause fallouts, all from the starting point of genuinely wanting to help people you (probably) love.
If it wasn t for your daughter potentially being affected and if you see your in-laws as your own family then one option could be to gift them the money and you all have a verbal agreement on a repayment plan.
If they are simply your partners parents and you want to protect yourself and your daughters finances then consider having an arrangement with some legal backing incase it all goes tits up.
Would they be leaving everything to your partner in their will? Not that a will is of any use if you split with your partner, or one of them dies and the survivor rewrites the will or remarries (which makes any will null and void). Plus a will can be changed at anytime, and overwritten by local authorities
Remortgaging to help someone else is a big ask and you could be left high and dry. Do you even have that much equity in your own house to allow a remortgage?
You are in a difficult situation where money and the heart collide. It could all work out in the end, but the end is a long way away and you could find yourself returning to this forum posting a new thread asking Help me get out of this financially tangled web .
Sorry to paint such a negative picture, but it s a potentially realistic one, especially as the in-laws don t seem to have even made provisions to have addressed how they were going to pay off the capital in the first place. Seems they enjoyed the period of reduced payments for the interest only years of their mortgage but not considered what happens then. Should you have to be the one that picks up the pieces for people who aren t even your relatives?
Hi thanks for the reply. Does your partner understand your concerns? It s a difficult subject to talk about and can cause fallouts, all from the starting point of genuinely wanting to help people you (probably) love.
If it wasn t for your daughter potentially being affected and if you see your in-laws as your own family then one option could be to gift them the money and you all have a verbal agreement on a repayment plan.
If they are simply your partners parents and you want to protect yourself and your daughters finances then consider having an arrangement with some legal backing incase it all goes tits up.
Would they be leaving everything to your partner in their will? Not that a will is of any use if you split with your partner, or one of them dies and the survivor rewrites the will or remarries (which makes any will null and void). Plus a will can be changed at anytime, and overwritten by local authorities
Remortgaging to help someone else is a big ask and you could be left high and dry. Do you even have that much equity in your own house to allow a remortgage?
You are in a difficult situation where money and the heart collide. It could all work out in the end, but the end is a long way away and you could find yourself returning to this forum posting a new thread asking Help me get out of this financially tangled web .
Sorry to paint such a negative picture, but it s a potentially realistic one, especially as the in-laws don t seem to have even made provisions to have addressed how they were going to pay off the capital in the first place. Seems they enjoyed the period of reduced payments for the interest only years of their mortgage but not considered what happens then. Should you have to be the one that picks up the pieces for people who aren t even your relatives?
Edited by The Gauge on Monday 23 February 08:42
Just to try and add a few details, they have 250k in equity which is being left to my partner and her sister.
I don't have any children of my own.
I could possibly get a personal loan of 50k which might be enough, or a secured loan against our house (we do have enough equity to do this).
I would definitely want some sort of legal agreement in place, it's just framing this so it doesn't look like i am thinking of leaving my partner (which i am not) and more from an 'it's in everyone's best interest' point of view, if that makes sense.
I would be seeking some professional advice on the best way to structure it all from a legal and tax standpoint.
Buying the property is,in my view, a complete non starter as it opens up a whole can of worms.
Especially if you are going to have to borrow the funds to pay off their mortgage - I am not sure how a lender would view this if you told them the reason you were borrowing the money for.
Whilst what you are wanting to do is admirable, part of me thinks that given they have let the situation develop, then they should be the ones to take the hit with a lifetime mortgage. How much could you lend them without having to borrow any money as that might be a compromise?
I m not up to speed with lifetime mortgages but I would have thought that given their ages, the value of the house and and amount of the loan required may not be too onerous.
Finally, can the other daughter assist in some way to reduce the reliance on you?
Buying the property is,in my view, a complete non starter as it opens up a whole can of worms.
Especially if you are going to have to borrow the funds to pay off their mortgage - I am not sure how a lender would view this if you told them the reason you were borrowing the money for.
Whilst what you are wanting to do is admirable, part of me thinks that given they have let the situation develop, then they should be the ones to take the hit with a lifetime mortgage. How much could you lend them without having to borrow any money as that might be a compromise?
I m not up to speed with lifetime mortgages but I would have thought that given their ages, the value of the house and and amount of the loan required may not be too onerous.
Finally, can the other daughter assist in some way to reduce the reliance on you?
ExBoringVolvoDriver said:
I would be seeking some professional advice on the best way to structure it all from a legal and tax standpoint.
Buying the property is,in my view, a complete non starter as it opens up a whole can of worms.
Especially if you are going to have to borrow the funds to pay off their mortgage - I am not sure how a lender would view this if you told them the reason you were borrowing the money for.
Whilst what you are wanting to do is admirable, part of me thinks that given they have let the situation develop, then they should be the ones to take the hit with a lifetime mortgage. How much could you lend them without having to borrow any money as that might be a compromise?
I m not up to speed with lifetime mortgages but I would have thought that given their ages, the value of the house and and amount of the loan required may not be too onerous.
Finally, can the other daughter assist in some way to reduce the reliance on you?
Agree about the buying being a non starter. I don't know much about lifetime mortgages but from what I've read it will probably mean my partner will end up with less/no inheritance? Buying the property is,in my view, a complete non starter as it opens up a whole can of worms.
Especially if you are going to have to borrow the funds to pay off their mortgage - I am not sure how a lender would view this if you told them the reason you were borrowing the money for.
Whilst what you are wanting to do is admirable, part of me thinks that given they have let the situation develop, then they should be the ones to take the hit with a lifetime mortgage. How much could you lend them without having to borrow any money as that might be a compromise?
I m not up to speed with lifetime mortgages but I would have thought that given their ages, the value of the house and and amount of the loan required may not be too onerous.
Finally, can the other daughter assist in some way to reduce the reliance on you?
I would be happy to try and get a loan for them but just need to be protected if things go wrong (break up/them both passing away/one passing away and not other not being able to afford repayments).
The other sister isn't in a position to help unfortunately.
Tony_T said:
borcy said:
How old are they? You can get normal mortgages upto 75, i think leeds building society do a normal one beyond that.
The whole thing sounds complex and covered in pitfalls if you go down this path.
I think they are 72 and 70. I don't know their income but they have been paying around £350-400 in interest payments each month. The whole thing sounds complex and covered in pitfalls if you go down this path.
Here's some starter stuff.
https://www.money.co.uk/mortgages/mortgages-for-ov...
https://www.saga.co.uk/mortgages/mortgages-for-ove...
I think trying to arrange it legally watertight to cover all the ifs buts and maybes is going to be difficult.
Are they financially savvy, is this part of plan or have they suddenly realised they are in trouble and need help?
Edited by borcy on Monday 23 February 10:31
Tony_T said:
Agree about the buying being a non starter. I don't know much about lifetime mortgages but from what I've read it will probably mean my partner will end up with less/no inheritance?
I would be happy to try and get a loan for them but just need to be protected if things go wrong (break up/them both passing away/one passing away and not other not being able to afford repayments).
The other sister isn't in a position to help unfortunately.
Yes, your partner and sister would potentially receive less inheritance although as it stands now they wouldn’t get all the equity either with the loan outstanding. Nobody is entitled to an inheritance at the end of the day.
I am not certain but I think that even with a lifetime mortgage there is the ability to make repayments and/or cover the interest payments (which presumably they are doing at present).
Professional advice for the in laws is required and I go back to my point (maybe harsh) of it is their situation to sort out.
I would be happy to try and get a loan for them but just need to be protected if things go wrong (break up/them both passing away/one passing away and not other not being able to afford repayments).
The other sister isn't in a position to help unfortunately.
Yes, your partner and sister would potentially receive less inheritance although as it stands now they wouldn’t get all the equity either with the loan outstanding. Nobody is entitled to an inheritance at the end of the day.
I am not certain but I think that even with a lifetime mortgage there is the ability to make repayments and/or cover the interest payments (which presumably they are doing at present).
Professional advice for the in laws is required and I go back to my point (maybe harsh) of it is their situation to sort out.
borcy said:
If it were me I'd point them towards a mortgage broker that does repayment mortgages for those past state pension age as a starter.
I think trying to arrange it legally watertight to cover all the ifs buts and maybes is going to be difficult.
Are they financially savvy, is this part of plan or have they suddenly realised they are in trouble and need help?
They've known a few years now, they could have sorted it at least partially by overpaying but they haven't and now here we are. I think trying to arrange it legally watertight to cover all the ifs buts and maybes is going to be difficult.
Are they financially savvy, is this part of plan or have they suddenly realised they are in trouble and need help?
There is still an option to downsize (3 bed semi to 2 bed terraced?) but we all want them to stay where they if possible.
'I think trying to arrange it legally watertight to cover all the ifs buts and maybes is going to be difficult.'
This is what i am worried about.
Gassing Station | Finance | Top of Page | What's New | My Stuff