anyone a mortgage advisor on buying a second property?

[custardo]

was thinking (dreaming) that maybe I could re-mortgage my house to buy a flat for my grown up daughter.

so this isn't a buy to let as such - more like a second property - as such no idea how this works and interest rates etc. 'cos I know with buy to let the interest rates are higher

anyone got any advice or experience to share?

I have been googling tax implications and I can't work it out

please help me :(

Would she pay rent to cover the mortgage?

hiya noddy!

I'm not sure would it be beneficial for her to pay rent and treat it as a buy to let - even though the interest rate is higher

or can I somehow gift it - and if I gifted it then is there a CGT implication if she then sells it to buy a larger home later in life

tiz much complicated

It all depends on how much equity you have and whether you have the multiples required to release enough to be a cash buyer. Also v difficult to get IO now if at all. Even with a family member you can get tax relief on the interest with a BTL. You probably need to speak to a mortgage adviser but I think iirc that if you gift it to her and you live another 7 yrs at least then it is IHT exempt. Capital gains tax will be payable if it increases in value. How bloody nice of you though

Chat to a good mortgage broker. One possibility is that you and your daughter buy in joint names (even if your share is just 1% - the mortgage companies do not mind as long as you are on the loan and jointly responsible for it all if she cannot pay) and the loan is based on your income and hers. I would have thought that would be at normal rates not higher buy to let rates. That assumes yours and her income taking of any existing mortgage you have, are enough to support a mortgage in terms of multiple of income. Let us assume so.

Then presumably you are raising the deposit (or even paying for the whole property) by releasing equity from your house.

Once you have remortgaged will you also need to borrow more on top of that for the new place or will the remortgage release enough money to buy the second property out right?

Assuming she pays you no rent then either that property is in joint names of you two with perhaps she having 99% of it (if you are happy to make her a gift of that amount) or you give 100% to her. If she might marry and her husband take half of it in a divorce you might prefer to keep the new place in joint names with you with her half going to you if she dies or even having some of it as a loan due back to you on sale so that if she divorces that is a debt.

citywire.co.uk/money/can-i-give-away-my-home-to-avoid-inheritance-tax/a589586

thank you both, much appreciated
had no idea about the 7 year thing

we have a great mortgage advisor, but this is at least 6 months off if not more - so wanted to get a feel for things

we have enough equity to re-mortgage and buy a small flat outright. On thinking about this further, i would have to charge her rent to cover our extra mortgage payments, and its lower than the rent money she would pay if she moved into a private rented flat, and she is paying towards her own future.

her partners father is dying and so there is an expected inheritance in a couple of years which could pay for almost 1/2 outright off us - of-course there wouldn't be any profit for us because that is not our motivation- and so if i have correctly read it right CGT doesn't come into play. that reduction arising from the inheritance monies will then significantly reduce the number of payment years and i think we could realistically 'gift' the other half to our daughter in around 7 years. at which point she can own it outright with her partner. at which point, i can only hope to god our son has his shit sorted, has met a solvent partner and we can do the same for him!

It is well below the IHT threshold

however it then becomes complicated because they aren't married ( they are too young i wouldn't want to push it either as she is only 20 at the moment) and always the realist...I wonder then what would happen if there is a split, the legal side would need to be air tight and therefore is likely to add the £££s in solicitors fees

thanks so much for the advice - the 7 year thing is a great thing to know

It can be problematic with a break up. Unless they both have the means further along to buy you out

She had he should have a contract about what percentages they each hold and what happens if one wants to sell and the other does not. It is not a major job for a lawyer to draw that up. It will mean if they break up and one wants to sell the contract will require that to happen or the other to buy them out of their half (if they go to 50/590 each). They should own as tenants in common not joint tenants. If part of what you provide is a loan it might be worth your being on the deeds too even if just as a 1% owner or whatever reflects the loan element. i was told if the parent had a 1% share it was unlikely to lead to any capital gains tax as the lenders require these 1%s rather than just a parental guarantee these days in similar cases to yours (except in your case the purchase is bought out right).

If she pays you interest you will be taxed on that. you could set the mortgage interest against what she pays you as rent if that is how you do it.

thank you so much - i didn't know anything this morning, it has really given me some greast stuff to think about