Mortgage Question
- Thread starter leigh_boy
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Soldato
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This.
Also, if the parents still owe money on the property, they can't sell the house without permission from the lender. Most mortgages aren't transferable.
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Is the property a second property for the parents? There will be CGT to pay on the market value not the sold price.
The difference between the sold price and market value is considered a gift and will be included for any IHT tax if necessary, it does not look like this applies in this case.
Also there is a £40k shortfall for the lender so the house can't be sold without paying that off plus any fees/extra costs.
The difference between the sold price and market value is considered a gift and will be included for any IHT tax if necessary, it does not look like this applies in this case.
Also there is a £40k shortfall for the lender so the house can't be sold without paying that off plus any fees/extra costs.
that makes no sense and you're either confused or you've had a very confused surveyopr
most houses/flats are worth more than the mortgage... since most people have a deposit, whether it is worth more than what you're paying for it is irrelevant too. The issue that they'd be concerned with is where it is, in their opinion, worth less than you're paying for it
How long is left on the term?
At the end of an interest only mortgage you have to pay the original loan back.
This sounds very dodgy.
Where do they get £110,000 from? Is that the outstanding mortgage, or the amount their son can afford to pay?
If they need a quick sale, why are they selling to him for £110k when they could shift it quickly on the open market for double that?
If his dad unofficially owns equity in the house, that could get messy. What happens if he or his dad get in to financial difficulties? There's so much potential for a mess there if either of them ever need to unlock equity from the house.
Where do they get £110,000 from? Is that the outstanding mortgage, or the amount their son can afford to pay?
If they need a quick sale, why are they selling to him for £110k when they could shift it quickly on the open market for double that?
If his dad unofficially owns equity in the house, that could get messy. What happens if he or his dad get in to financial difficulties? There's so much potential for a mess there if either of them ever need to unlock equity from the house.
Soldato
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is the £110k the 'mothers half'?
i have no idea and nor does he, il try find out leter at the gym.
so its all stems from the divorce, from 8 years ago, the deal was his dad buys his mum a house and give her 20k.. he did buy her a house but never gave over the money shes now getting re married and wants to move on.. and now wants her money from the house. obviously the market has changed in 8 years and she probabbly wants her half? i have no idea ..
Theoretically yes but in practice, no... selling a property to a family member way under market value will trigger all sorts of fraud alerts.. There are potential tax avoidance implications for starters..
Lenders don't mind parents selling to children under market value (to a point) but the numbers you are quoting there are just bonkers..
Tell him to go and sit down with an experienced, professional mortgage adviser or IFA rather than trying to get info from a computer geeks website.
This is WAAAYYYY beyond the knowledge and experience of the layman!
Associate
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Sounds like a dodgy deal to me.
If the parents took out an interest only mortgage then they've only ever paid the interest and the outstanding capital balance would have to be paid before the mortgage company would allow a sale to go through or a transfer of ownership.
The first thing your friend needs to do is find out how much it would take to redeem the mortgage. The second thing to do is to speak to a mortgage advisor.
As long as the mortgage is paid in full then the mortgage company should not have any issues with the sale going through.
I don't see the issue myself really, it's up to you what price you sell your possessions for?
I don't think it can be an IHT dodge as I vaguely remember something about they do look at things like that and would value them at current market value for estate valuation reasons, the same with CGT if the item is passed on to a connected person.
As for dodging SD, thats not the intent, so would they care for a one off transaction?
Edit : Just googled it and you could sell it for £1 if you wanted to, as I thought.
I don't think it can be an IHT dodge as I vaguely remember something about they do look at things like that and would value them at current market value for estate valuation reasons, the same with CGT if the item is passed on to a connected person.
As for dodging SD, thats not the intent, so would they care for a one off transaction?
Edit : Just googled it and you could sell it for £1 if you wanted to, as I thought.
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If you were asked to pay the difference it means Halifax valued the property lower than you offered, meaning there was a 20k gap between what they were prepared to lend and what you had already put in as a deposit.
As I said... in theory there's nothing wrong with it... if he is paying cash he might get away scot free.. as for the revenue 'letting it go' with regards to SD... doubtful!
I'm not a tax expert but It may well impact IHT as the equity will probably be treated as a gift and therefore subject to 7 years tapering relief.
If he needs a mortgage however, it simply wont happen.. it smacks of fraud and money laundering and no undewriter will let it go through..
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You are correct.. Valuers will NEVER over value a house for mortgage purposes.. that's not what they are there for, they are there to make sure it is worth what you have told them it is and to ensure it is a mortgageable security.
They will either confirm its value or reduce its value, they won't increase its value.
This thread is so full of fail 
OP - Ignore all the calls of dodgy tax dodging etc and not getting a mortgage agreed because of this - It is total nonsense.
This is called a transaction at undervalue, where the vendor is effectively gifting the purchaser part of the equity. It is not that uncommon.
Legal advice should be sought by all parties around SDLT and IHT implications and of course the implications of the gift of equity, plus other legal implications for both parties. Usually this would be given by the solicitors acting for each party in the transaction of the sale and purchase.
In terms of mortgage borrowing, it would only be possible if neither of the parents will continue to live there, as it has to offer vacant possession on completion of the mortgage. It reads that neither would be, but needs to be checked.
Most lenders will also usually still expect a deposit from the purchasers own resource, typically 10% of the discounted purchase price, although I believe there may still be the odd lender that allows the gifted equity to act as deposit with no further addition from the purchaser.
The difficulty here is the numbers don't stack up as already pointed out a number of times so that would need establishing - How much is needed to clear the current mortgage plus whatever else is expected that the parents want to get out from it.
Once he has established the numbers - A good broker is the next step (not one of the conveyorbelt farms like L&C).
OP - Ignore all the calls of dodgy tax dodging etc and not getting a mortgage agreed because of this - It is total nonsense.
This is called a transaction at undervalue, where the vendor is effectively gifting the purchaser part of the equity. It is not that uncommon.
Legal advice should be sought by all parties around SDLT and IHT implications and of course the implications of the gift of equity, plus other legal implications for both parties. Usually this would be given by the solicitors acting for each party in the transaction of the sale and purchase.
In terms of mortgage borrowing, it would only be possible if neither of the parents will continue to live there, as it has to offer vacant possession on completion of the mortgage. It reads that neither would be, but needs to be checked.
Most lenders will also usually still expect a deposit from the purchasers own resource, typically 10% of the discounted purchase price, although I believe there may still be the odd lender that allows the gifted equity to act as deposit with no further addition from the purchaser.
The difficulty here is the numbers don't stack up as already pointed out a number of times so that would need establishing - How much is needed to clear the current mortgage plus whatever else is expected that the parents want to get out from it.
Once he has established the numbers - A good broker is the next step (not one of the conveyorbelt farms like L&C).
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This thread is so full of fail
OP - Ignore all the calls of dodgy tax dodging etc.
This is called a transaction undervalue, where the vendor is effectively gifting the purchaser part of the equity. It is not that uncommon.
Legal advice should be sought by all parties around SDLT and IHT implications and of course the implications of the gift of equity. Usually this would be given by the solicitors acting for each party in the transaction of the sale and purchase.
In terms of mortgage borrowing, it would only be possible if neither of the parents will continue to live there, as it has to offer vacant possession on completion of the mortgage. It reads that neither would be, but needs to be checked.
Most lenders will also usually still expect a deposit from the purchasers own resource, typically 10% of the discounted purchase price, although I believe there may still be the odd lender that allows the gifted equity to act as deposit with no further addition from the purchaser.
The difficulty here is the numbers don't stack up as already pointed out a number of times so that would need establishing - How much is needed to clear the current mortgage plus whatever else is expected that the parents want to get out from it.
lenders who allow gifted equity have limits.. normally 20% max... this simply won't happen with a mortgage
I can categorically tell you this type of transaction is possible with borrowing up to 90% of the discounted price. I believe it is also still possible with a limited number of lenders to go to 100% of the discounted price if that falls below 90% of the open market value but couldn't categorically say so on that point.
You obviously know far more than me then...