Has anyone experience of buying a house that has been inherited by a family member?

[excitedbunny79]

Hi

I'm looking for some really basic information (not financial advice) about buying my grandads house from my parents.

To cut a long story short, my parents inherited my grandad's house when he passed away (no other siblings involved) 10 years ago and decided to upgrade it from a Dorma Bungalow to a House. The idea was they'd do it up and sell, but ended up renting it out to pay back some of the mortgage they took out to do it up and keep it as an investment. Fast forward 7 years later and they are getting on in years and I'd like to buy the house. However, I have no idea how it would work?

To give rough figures they have a mortgage of £150k and the House is probably worth £350k, there is no way I would get that kind of mortgage but I could get a £150k which would pay off their mortgage. But can I even do that? or would the house have to be valued at market value for me to get a mortgage to pay off theirs?

They're quite happy to keep it in the family if I can pay off their current interest only mortgage, otherwise the house will have to be sold.

Does anyone know what my options are?

Any advice would be really appreciated.

[Dr.JumbaJookiba]

Are they happy to sell it you 100% for £150k or are the expecting shared ownership for that price?

[duchy]

They could sell you a part share , are you the only child so would inherit the rest later or are there other siblings inheritance to take into account ?

[Blue nose]

They can sell it to you for any amount they choose. £10 or £100,000. You borrow what you need.

If that covers their mortgage or more than is their business.

[munmun]

They would have a Capital Gains Tax bill probably

[munmun]

Originally Posted by Blue nose

They can sell it to you for any amount they choose. £10 or £100,000. You borrow what you need.

If that covers their mortgage or more than is their business.

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CGT is worked out at the actual valuation not the valuation you choose so they would need to get it valued

[Claudette]

Your parents can sell the house to you for whatever price they want to accept. The bank would apply their usual lending criteria, so yes they would consider what the house is worth on the market versus the £150K you wish to borrow. They would presumably be relatively comfortable with a £150k mortgage against a £350k house that you are the full owner of. If you are only to be a partial owner of the house they would be less comfortable as they need the security.

There are both capital gains tax and inheritance tax implications you need to look at. As this is not their main residence your parent(s) will have to consider CGT, regardless of how much they sell the property to you for, any CGT will be based upon a fair market price. Additionally the difference between what you pay and the market value will be deemed a gift for inheritance tax purposes.

[excitedbunny79]

Thanks all for the advice. I’m an only child so I’ll 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 couldn’t afford and it would have to go on the market.

[excitedbunny79]

Originally Posted by Dr.JumbaJookiba

Are they happy to sell it you 100% for £150k or are the expecting shared ownership for that price?

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They just want the mortgage they took out to do the house cleared, I think there is 2 years left. They won’t want shared ownership.

[excitedbunny79]

Originally Posted by Claudette

Your parents can sell the house to you for whatever price they want to accept. The bank would apply their usual lending criteria, so yes they would consider what the house is worth on the market versus the £150K you wish to borrow. They would presumably be relatively comfortable with a £150k mortgage against a £350k house that you are the full owner of. If you are only to be a partial owner of the house they would be less comfortable as they need the security.

There are both capital gains tax and inheritance tax implications you need to look at. As this is not their main residence your parent(s) will have to consider CGT, regardless of how much they sell the property to you for, any CGT will be based upon a fair market price. Additionally the difference between what you pay and the market value will be deemed a gift for inheritance tax purposes.

See more...

I’ve not had to ever deal with CGT or inheritance tax before so I don’t 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?