House Deposit Gift From Parents

Posted on 26 June 2018 by G. Cooper

Hello, My parents own a property valued at around £200,000. They plan to sell-up and move to be closer to me and my family. So they can retain some money to enjoy retirement they have proposed the following. They will gift me £100,000.  The remaining £100,000 they will keep and enjoy. Using the gifted £100,000 as a deposit I will then buy a property of £200,000 or less raising the outstanding amount with an interest only mortgage. They will live in the property and give me (gift me?) the interest repayments.  They will have the £100,000 plus they both have private pensions. When they die I will sell the property, pay off the mortgage, keeping the £100,000 deposit plus any increase in value (minus CGT).  There are no Inheritance tax issues because my parents estate is below the threshold. So, is this feasible?  Will a mortgage company loan me the money for a property (2nd home?) I will not be living in? My understanding is I cannot get a buy-to-let mortgage because they all stipulate that you cannot rent it out to relatives so I guess it will be a residential mortgage. My own residential mortgage is £119,000 on a property valued at £300,000+. My salary is £55,000+.

Hi G. Cooper,

You are correct, in that most lenders are no longer doing regulated Buy To Let's, which is where you would rent the property out to a close family relative.

This transaction is basically a "home for dependent relatative" and should be feasible, based on the brief information provided. There are a number of lenders who will look at this scenario, however they will look at the case based on your overall affordability of the total borrowing you will have.

If you'd like to get a more definite idea of exactly what you could do, then please contact one of our consultants on 0344 346 3672 and they'll be able to assist you.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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