First time getting a buy-to-let - but buying from parents

[Curlybrunette]

Hi everyone,

It's a bit complicated so bear with me!

My parents have a house that they rent out, they have £120,000 left on the mortgage, house would sell for about £190,000 ish (so £70K equity in the house). They want to sell the house to release cash and we mentioned that we were thinking of getting a buy-to-let so they've said we can 'buy' their house.

My parents released some equity from their house (the one now rented out) to buy their current house. As my dad was over 55 they wouldn't give him the mortgage (I think they must have signed up to a new deal when releasing the cash?) so I am on the mortgage with my mum. I don't pay anything towards the house, it is in name only.

Mum and dad have said to save time and money I can just take over the payments of the mortgage, we can get a solicitor to sort out the official ownership of the house/deeds etc and voila it's ours. They said they are happy for us to pay the £70K profit they would have made over time. They'd be happy with £10K a year for the next 7 years or something.

How does it all work legally? It seems too simple they way they've suggested it (me already being named on the mortgage has helped things). I have no idea about capital gains tax etc. DH and I have a business so we already do a self assessment each year but have I missed anything obvious.

Thank you, I am totally new to this and much appreciate any advice

It will be a straight forward change of title, from your mothers and yours to your name.

It will be re underwritten due to the change in financials, even if it is a Buy To Let.

CGT will be your mums issue, not yours, and will be from the date it goes into sole names.

Do you own your own house, and did you pay the second property stamp duty rate on it +3%? If not, and it was when it was in play, you will need to sort that out.

I do not know many solicitors, who will advise your mother come off the property and receive £10k per year as payment. They will advise full and final settlement the day she comes off the property. Remember they are advising your mum and her best interests.

Thanks a lot for the reply.

We have our own house (with mortgage). We don't have another buy-to let so just paid the normal stamp duty when we bought it.

It was my parents idea about the £10K a year, I did say to them that it seemed too good a deal for us but they are insistent that's what they want.

Thank you

You should have paid the additional stamp duty, as you technically own another property

'You must pay the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:

it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world
you have not sold or given away your previous main home
no one else has a lease on it which has more than 21 years left to run'

How much rent does this property generate per year ?

Example
12k rent per year
£2, 400 self assessment tax (20 percent)
£2k on repairs
Perhaps some months with no rent, where you need to pay council tax & utilities
How are you going to pay your mother 10k per year ?

Secondly, if you already own half of the property due to already being on the mortgage. Wouldn't you need to buy your mother out of the property, then get a new BTL mortgage just in your name ?

If you own more than one property, you are liable to pay stamp duty

I suggest that you find some financial advice, because this sounds complicated

I would suggest a clean financial break from your parents, whatever decision you make

10k per year sounds like a bad idea
What if they add interest
What if you can't pay them (your circumstances may change)

It also sounds like you should have paid additional stamp duty and didn't

I think my parents must have paid the stamp duty owed as I was doing them the favour by being on the mortgage, I haven't received any money from the rental so they wouldn't have expected me to pay any stamp duty.

We've been talking about it (DH and I) while we've been away this weekend and we have agreed it is too complicated to pay 10K a year, we do need to make a clean break and have made an appointment with a solicitor to discuss the best way to do it.

Thanks everyone

If you are on the mortgage, you own part of that property already

You are liable to pay the mortgage if they can't

You were liable to pay the stamp duty

Perhaps you should have also filled out a self assessment tax return too, if rent has been gained

Definitely seek legal advice

The tax man, can seek tax 25 years in arrears

I would listen to @Last1Days0ut

I would check the solicitors final statement and check how much stamp was paid, I doubt they were aware they needed to add the 3% surcharge