Mortgaging gifted property

[crescen]

My father gifted me a property last year. We still have six more years before I can claim the house without attracting any inheritance tax. The house is worth £600k and currently fetches £1500 per month. It is not suitable for my family at the moment. Can I mortgage it to use the equity to buy a new property? What are the legal implications if anything should happen to my father in the next six years? Do banks give loan againt such properties?

There is no “claim the house” - you either own it or you don’t. If he gifted it to you then you own it.

If you own it yes you should have no problem mortgaging it.

If your dad dies before time then his estate may have an inheritance tax bill - and if it can’t pay it then HMRC will come to you with demand to pay it. In which case you might have to sell either that house or the one you buy or both.

Of course, your dad might have another property (that he is still living in?) that could be sold to pay the inheritance tax bill (assuming he leaves that to you also).

From a business perspective, as much as I hate BTL, £1.5k rent is very poor for a £600k investment, sell it and buy 4 houses for £150k each that rent for £750 each.

Or more simply just sell it and use the proceeds to buy a house you do want.

You are going to have a massive CGT bill when you come to sell it if is not your main residence. If you got the house via probate rather than a gift you would pay very little , if any, IHT depending on your mother's probate.