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Where Taxpayers and Advisers Meet

Loan or gift from parent

Goldy555
Posts:5
Joined:Mon Feb 29, 2016 9:08 pm
Loan or gift from parent

Postby Goldy555 » Fri Feb 25, 2022 12:43 am

After some advice . After my dad passed away my mum has sold her house to move closer to her children. She has a lump sum but not enough to buy a house. To help her out me and my sister have got a mortgage ( regulated buy to let)
We are putting down 185k mortgage and mum the other half . Mortgage company have said we have to own it and as such money would be a loan or gift to us.
The plan is always to sell when she passed away and her half would go back into her estate to be split between 5 children. This will be the only inheretence as there will be bother else.
If we do it as a gift we have been told when we sell me and my sister would be liable for full capital gains tax and if we loan it would have to be shown as a 2nd charge on the property which the mortgage company won’t accept. If we do loan does it have to be a second charge? Can we not just do a separate legal agreement detailing her wishes and that it would be payable on her death? Any advice would be much appreciated

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Loan or gift from parent

Postby AGoodman » Mon Feb 28, 2022 12:00 pm

No, there's no requirement to have a second charge, it can just be a loan agreement. The mortgage company may or may not accept that.

The other possibility is that all three of you buy the property as tenants in common, your mother joins you on the mortgage and she has a 50% beneficial share. That would only work if the mortgage company accepted her as a joint borrower alongside you but it would be neater.

Goldy555
Posts:5
Joined:Mon Feb 29, 2016 9:08 pm

Re: Loan or gift from parent

Postby Goldy555 » Mon Feb 28, 2022 5:06 pm

Thanks for the reply.

The issue is the mortgage company won’t accept mum on the mortgage so it is me and my sister on this who will be shown as tenants In common.

They are also saying they want it as a gift as they wouldn’t want a 2nd charge on the mortgage.

We are not worried about the second charge and it has always been about helping mum and when she does pass away selling it and repaying her money into the estate for inheritance for the children. But if we have to show a gift the worry is we get hit with cap gains tax on 185k.

It has been suggested we go through with it as a gift and the. Get a loan agreement drawn up

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Loan or gift from parent

Postby maths » Tue Mar 01, 2022 3:38 pm

I would suggest you/sister effect the purchase and thus both of you appear on the legal title. You/sister would also be the names on the mortgage.

Either simply lend unsecured or, if mortgage company won't agree unless you gift to mum, then gift it.

On purchase you/sister execute a declaration of trust confirming you hold the legal title to the property on trust for mum absolutely.

You/sister thus don't own any part of the property beneficially and hence are not exposed to any future CGT charge on sale.

Or, you/sister proceed as above but instead under declaration of trust each of you simply take a 1% beneficial interest so mum's interest becomes 98%.


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