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Where Taxpayers and Advisers Meet

Transferring Property To Parents

Kentguy
Posts:6
Joined:Tue Jul 21, 2020 5:49 am
Transferring Property To Parents

Postby Kentguy » Tue Jul 21, 2020 6:27 am

Hi
My son-in-law took out a Mortgage on a property many years ago, to help his parents
He facilitated the mortgage and the mortgage and the property are both in his name.
However, his parents have lived in it and paid the mortgage payments via their own bank account
for many, many years. It has always been viewed as being their property albeit in their son’s name.
It is currently worth around £180k and the outstanding mortgage now amounts to £40k
His parents are now too old to take out a traditional mortgage to clear the mortgage in his name
to enable transfer of ownership and they do not have savings from which to do so.

The main problem is that my son-in-law and my daughter are now burdened to have this property in
his name because they now wish to purchase their own home and his parents have no desire to move.
This means that should my son-in-law and my daughter want to buy their own home, then it would
a) be regarded as a 2nd property and attract the extra 3% Stamp Duty and b) the £40k Mortgage in his name
would reduce their own borrowing capacity significantly.

If the property were to become mortgage free and transferred as a gift to his parents, then once it was in their name, they could
apply for an Equity Release loan via a Lifetime Mortgage. However, for it to become mortgage free, we would need to lend the money e.g £40k to our daughter and son-in-law to facilitate this. His parents could then raise the money back via Equity Release to repay the loan we had made originally ...

The question is, how could this best be arranged so that we protect both ourselves and all parties concerned ?
I assume that we could draw up a loan agreement between ourselves and our son-in-law and that they could do the same
between themselves and his parents ?

I understand that the property in the parents name may leave it open to being claimed against by the local authority should elderly care need to be funded in the future, but other than that, are there any other issues or implications that would need to be explored ?
Would the repayment of the loan monies between my daughter & son-in-law and his parents cause any issues with being liable to the local authority claim against it as being a deprivation of assets ?

Are there any other workable solutions that overcome my daughter and son-in-law achieving both a) avoiding the second home extra 3% Stamp Duty and b) not being penalised against their own borrowing fir a new mortgage.

Many thanks in anticipation of your kind assistance

HinaFelix
Posts:5
Joined:Wed Jul 08, 2020 1:51 pm

Re: Transferring Property To Parents

Postby HinaFelix » Tue Jul 21, 2020 11:58 am

I think it is better to use a mortgage broker service, they will do it for you. So you can save more money paying them than trying to do it by yourself. I remember when I needed a mortgage service when I moved to Manchester, I found a company that helped me with all the paperwork, and the initial consultation was free so they answered a couple of questions for me.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Transferring Property To Parents

Postby bd6759 » Tue Jul 21, 2020 4:42 pm

What does the current lender understand about the situation? Is it a homeowner or a buy to let mortgage? Does the lender know who is residing in it?

What I'm trying to establish is the real ownership of the property.

Kentguy
Posts:6
Joined:Tue Jul 21, 2020 5:49 am

Re: Transferring Property To Parents

Postby Kentguy » Tue Jul 21, 2020 8:56 pm

I think it is better to use a mortgage broker service, they will do it for you. So you can save more money paying them than trying to do it by yourself. I remember when I needed a mortgage service when I moved to Manchester, I found a company that helped me with all the paperwork, and the initial consultation was free so they answered a couple of questions for me.
Hi thanks for your reply. That is what we intend to do eventually. However, no mortgage applications could be considered until the conundrum of how this could be best resolved would be possible.. I am hoping that some mortgage / tax professionals can assist me initially in this forum

Kentguy
Posts:6
Joined:Tue Jul 21, 2020 5:49 am

Re: Transferring Property To Parents

Postby Kentguy » Tue Jul 21, 2020 9:04 pm

What does the current lender understand about the situation? Is it a homeowner or a buy to let mortgage? Does the lender know who is residing in it?

What I'm trying to establish is the real ownership of the property.
Hi, sorry yes it is a Homeowner mortgage. The lender would be aware that the parents are living in the property as they have been since the inception of the mortgage when their son was living there also. He has subsequently moved into rented accommodation and the parents have continued to pay the mortgage from their own bank account since. They are both too old and have insufficient income of their own to raise a traditional mortgage on the property to clear the existing mortgage in their son’s name. The residual income after the first death of the parents would also be insufficient to raise “an interest only retirement mortgage”
So the parents clearly have a Beneficial Interest in the property as they have been paying the mortgage. However this loan in the son’s name would still impact upon his own borrowing capacity to purchase a new home for his own family...

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Transferring Property To Parents

Postby bd6759 » Wed Jul 22, 2020 7:51 pm

OK. Maybe a lifetime mortgage if there is £140K equity. As Kentguy said, speak with a mortgage advisor to what could be available.

HinaFelix
Posts:5
Joined:Wed Jul 08, 2020 1:51 pm

Re: Transferring Property To Parents

Postby HinaFelix » Thu Jul 23, 2020 1:10 pm

i asked my sister, and she recommends a mortgage broker that she used some years ago. There is a good team , with good experience, they review your current situation and circumstances and help you in obtaining the best offer . https://manchestermortgages.co.uk


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