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Old 21 Apr 21, 10:32 PM  
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#11
400ixl
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You need to seek proper advice from a specialist in this area. CGT will I believe apply at the point of sale. In some cases it can go back to the original value of the house, other times from the inheritance. You need that advice before deciding anything really.
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Old 21 Apr 21, 10:39 PM  
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#12
Lostbrain
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I think your parents would have to gift you the remaining £200k, the bank would want a letter from them stating that they had no financial interest in the property. Their tax liability wouldn't change so you would all need to consider that. If they died within 7 years of the transaction the house would be considered part of their estate for inheritance tax purposes, but if everything is going to you anyway this might not be a consideration.
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Old 21 Apr 21, 10:46 PM  
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SgtElias
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CGT will definitely be an issue if this is not your parents main residence.

However, depending on your parents circumstances IHT might not be an issue.

Your parents have their main IHT relief of £325,000 each, this is also transferable to the survivor after first death.

So if your dad passed away first, your man has a main IHT relief of £650,000. On top of this they have a ďnil rate residence band reliefĒ this is an additional relief on their main residence of £175,000, again, this is each and is also transferable on first death.

Therefore, and as long as there has been no use of allowances, on second death, there is a million pounds worth of allowance available, to hopefully mitigate any potential IHT.
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Old 21 Apr 21, 11:22 PM  
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I don't know anything about CGT etc but with regards to mortgage and valuations, as people have said, your parents can choose to sell it for whatever they like.

If it is valued at £300K and they only want £150K, then providing your affordability is fine, the lender will happily provide you with a mortgage*. If the house was valued at £100K, and your parents wanted £150K - the lenders will not give you the extra. That's where Loan to Value comes into play.

*Also sorry if you are well aware, I don't mean to be patronising. If your lender is offering you 90% LTV and your parents want £150K, your lender will only loan you £135K (regardless of affordability or what the home is valued at)
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Old 22 Apr 21, 02:38 AM  
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Claudette
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Originally Posted by excitedbunny79 View Post
Thanks all for the advice. Iím an only child so Iíll inherit it eventually if the mortgage they have can be paid back.
I was just a bit worried that if I applied for a mortgage the mortgage company would value it at an amount I couldnít afford and it would have to go on the market.
It doesnít matter if they value it for more than you are expecting. You want to borrow £150k, that is not going to change because the house is valued for more than you think.

Originally Posted by excitedbunny79 View Post
Iíve not had to ever deal with CGT or inheritance tax before so I donít understand it. Is it worked as a percentage? Is this something they will have to pay as soon as they sign the house over to me?
The CGT will be payable more or less straight away. It will be levied as a % of the profit which will be calculated based upon the market value at the time of the sale to you, not what you pay them. They can deduct capital expenditure from the profit and everyone has an annual CGT allowance, a bit like the personal allowance for income tax.

There would be no immediate inheritance tax impact. A gift becomes relevant for IHT purposes if the gift giver should pass away with seven years of making the gift. Of course there are IHT allowances and the estate might not be over the IHT threshold anyway, but the sums need to be done considering the gift.

Edited at 02:41 AM.
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Old 22 Apr 21, 08:19 AM  
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borntoshop
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Many years ago we bought our house off the lady who was moving in with my grandad. It was valued at £36,000 but she let us have it at £27000 to help us. It's a long time ago but the amount was never queried by the mortgage company and when a few small things came up on the survey they were left for us to do.

It was a very good buy and our first home which we still live in it more than 30 years later

Edited at 08:21 AM.
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Old 22 Apr 21, 10:03 AM  
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parisdisneyfan
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I would say you all need to see a solicitor and financial advisor. It may just be advantageous for you to "rent" it from your parents covering the mortgage if there is only 2 years left to go and then them just to gift it to you I would think it will be straightforward as you are an only child assuming your parents have not siblings that were expecting a cut after they had done it up!

Be wary of solicitors etc trying to persuade your parents (and you) to put it all in trust so that it circumvents IHT and possibly CGT too. We have had this suggested to us twice, once by my parents in laws solicitor, he was talking about putting their house, our house and my sil's house all in one to avoid paying IHT and care home fees It was also suggested when my dad died and it was a bit sharp of the solicitors as they knew that we weren't going to go anywhere near the IHT limits

Good luck with it all x
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Old 22 Apr 21, 12:50 PM  
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Claudette
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I think you need professional advice too. In the first instance I would recommend you get that advice from a tax accountant as the potential tax consequences seem the greatest consideration here. Once you are clear on these matters, you need a solicitor to deal with the paperwork.

You say there is only two years left on the mortgage, this is an interest free mortgage, so do they have a plan to pay off the capital in two years, or was the intention always to sell at this point?
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Old 22 Apr 21, 12:57 PM  
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Lisa123wm
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OP are your parents paying only the interest on the £150k mortgage that they took out, and this ends in 2 years?
If so, Iím guessing they do not have the £150k to clear the outstanding mortgage and therefore plan to sell it?
This is where you come in - to buy it at the £150k rather than them selling it?

Lots of questions, but thatís what Iím getting from reading through.
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Old 22 Apr 21, 12:59 PM  
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If it's an interest only mortgage, then your parents will have to sell the house either now, or in two years.
In either case, there will be capital gains tax to pay on the true value of the house.
The difference being, if they sell it for true market value, they will have the money to pay that tax bill, but if they sell it to you for just the value of the mortgage then they won't.

You can work out how much capital gains tax you owe using this calculator
gov.uk/tax-sell-property/work-out-your-gain

I would think you should be paying at least the value of the mortgage+ the capital gains tax amout so that they are not out of pocket.

You seem to be concerned that the mortgage company will expect you to pay the full price of the house. They won't care how much you pay for the house, as long as the house is worth more than you owe.
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