Buying house from family at reduced rate

[Cherrybakewellard]

I'm wondering if anyone has any personal or professional experience with this. I've got an appointment booked with a good advisor next week but in the meantime I thought I would see if anyone was a bit clearer than google.

Basically 7 years ago I got divorced. We had sold my home that I had bought from my own money before being married and there was luckily a document in place which meant I got the proceeds of the sale of that house. My then husband and I were renting for 3 months while awaiting the completion of purchasing a new house together, both on the mortgage.

My then husband decided the best thing to do was run off to another country with his boss and never come back. That's a story for another day but basically the only way for me to continue to purchase the house was for my parents to take on the mortgage in their name. I pay the actual money it's just through them. Luckily that worked out and I'm now in the same house, remarried and we want to take the house back into our names.

My parents are willing to sell it back to us for what's outstanding on the mortgage, which luckily is less than half what it's valued at.

Still with me?

My concern is that between all of us we would have to pay stamp duty and/or capital gains tax.

Am I missing some loophole?

I understand if my parents pay off the mortgage entirely they can sell it to me for £1. Then I could get a mortgage and pay them back the lump sum, again I hope that makes sense.

1. A sale at an undervalue or gift attracts CGT as if it were a transfer for full value.
2. If your parents were holding their interest in trust for you there may not be CGT payable.

Yes it is like any other house sale so stamp duty payable

Yes to potential capital games tax liability depending on how much is the difference in value. However, unless it is huge, house values are very subjective so you may avoid it

We just had to get it in writing for the solicitor from PILs that they had no financial interest in the house once sold to us. Also they didn't pay capital gains tax as it was just under the taxable amount

Thanks for your replies.

Unfortunately for this purpose the house is worth around £600k so percentage wise it's quite a lot for stamp duty and capital gains.

@justlikejasper interesting that you were able to do this. Perhaps I should also consult a property lawyer/solicitor too.

I guess in the heat of the divorce/move/becoming a single mother to 2 under 2 at the time of the house purchase I didn't consider the long term implications.

Many thanks x

I bought from a relative, we got the mortgage needed and he ‘gave’ me the deposit (the outstanding value) as a gift.
We had to pay stamp duty and legal fees but no capital gains as it had been his main residence. I think if your parents have never lived there it would be eligible for that.

I read ( have been doing a bit of research on this for various reasons) that you can give someone a house but if there’s an outstanding mortgage you have to pay stamp duty on the value of the mortgage. Unfortunately I can remember where I found the info.

I have no idea how to do it, however you will need to sort this out because if your parents ever need care they will take the value of the house in to consideration unless they have trusted the house to you

Look at Genuine Bargain Price Mortgage with Nationwide.

I can recommend a broker that can sort all the paperwork for you if it helps.

Thank you all for the recent replies.
I actually work in finance for a care company so I'm aware of the assets they bring in to this equation (wether I agree with that or not is another matter).
Luckily although the house is worth nearly £600k the mortgage is actually only £200k and my husband is technically a first time buyer so if it's just stamp duty then that's great as we would get stamp duty relief. It's more the capital gains I worry about.

I'm fairly certain you both need to be first time buyers to get stamp duty relief.

@Violetroselily

I'm fairly certain you both need to be first time buyers to get stamp duty relief.

Yep that is my understanding too.

The mortgage needs settling to be able to sell the home.

They don't own the house as there is a charge on it.

Do they have the funds to do so. Any mortgage you got would be against the value of the house and based on the valuation so you would pay tax on anything over £125k

Having problems posting. I would read up on gifting

What Collaborate said. There will be capital gains payable at the market value unless you can persuade HMRC that it was held in trust. Stamp duty is payable in the usual way.

I bought my house from family and we rented it previously for years from them. Still had solicitor and conveyance fees as well as stamp duty.