Buying a parent a house - considerations ?

[markrichardsonno9]

Hi all

I wonder if the collective have any thoughts on the following

My father ( mid 70`s widower ) lives on his own in a mortgage free house , nice enough but about 1 and half hours drive from me ( only family ) , gets by on a state pension and a very small private pension combined, no other assets to speak of. Now there are some houses being built not far from where I live that he would jump at the chance to move to !

But how to go about it ? He could of course put his house on the market and it should sell sharpish but who knows, this of course runs the risk of him missing out on the new one ! Or a thought I had was that I could loan him the money to buy the new house while his current sells ? If that was done what should I be thinking about , should / could the house be purchased in his name or mine ( id inherit it one day anyway ) , what considerations are there or ideas from the tzuk collective on a different approach ?

Thanks

[Chicken Pox]

Not an expert so just initial thoughts:
If you buy it will be classed as second home and stamp duty will be additional 3% but maybe less than IHT
If you buy it, then your Dad buys it off you and transfer ownership, it will incur 2 lots of stamp duty and legal costs
If you buy it and your Dad gives you the money, but pays no rent and you are still the owner I'd have thought there could be IHT considerations, and if he needs care in the future council can still see this as an avoidance approach

Are the houses moving that fast that he would miss out being part of a normal chain?

Anyway, nice thought I hope you can work something out.

[markrichardsonno9]

Thanks for the input CPox , IHT not likely to be a concern as he has nothing really in the way of assets except his current property and that ( and potential new home ) is around 200k

Whilst I wouldn't say houses are moving fast , I would say in this case there would be a real chance of him missing out on the new one next to us.

[chrisparker]

Is it a large developer building the new homes? Most off a part exchange which would avoid the risk of missing out and take the sales headache away.

[Captain Morgan]

If you loan your dad the money he’ll need to pay the additional stamp duty but this can be reclaimed once he has sold his place.

That said what’s stoping him making a offer & putting his on the market as per a normal chain?

[Suds]

If the new estate is being built/released in batches then i would suspect the second and subsequent tranches will sell at a higher price (traditioanlly). The new builder wil probably pay £20K less than market value? Against £6K additional sales tax?
I don’t see why if necessary you couldn’t loan your dad the money to be repaid when his house sells - but it might be worth speaking to your solicitor to understand any potential pitfalls - my solicitor charged about £160 about 5 years ago when he sorted 2 wills and a deed of gift property transfer ( I don’t know who was more shocked - me because the cost was so low, or him when I blurted out “blimey that’s cheap”). Would be a good time for your dad to update his will anyway.

[Chinese_Alan]

Is it a large developer building the new homes? Most off a part exchange which would avoid the risk of missing out and take the sales headache away.

This is a good suggestion. You may even also get legal costs covered by the developer. What is the difference in values likely to be? If you say his current house is worth £200k - you’d probably need to be moving him to something in the £260k+ bracket for them to bother…however depends how sales are performing.

They should get 3 independent valuations and offer you the middle point.

[Qatar-wol]

If you loan your dad the money he’ll need to pay the additional stamp duty but this can be reclaimed once he has sold his place.

That said what’s stoping him making a offer & putting his on the market as per a normal chain?

If you are buying a second home with the intent to sell your first later, you have (if I recall) eighteen months to reclaim the higher rate of Stamp incurred on the purchase of the "second home".

[TaketheCannoli]

I'm sorry but this feels a bit of as fuss about nothing. Find a house he likes on the new development, agree a price, put his on the market and do what millions of people do every year. It's basic house moving protocol.

[draftsmann]

It sounds like a temporary measure, whereby you provide funding so your father can purchase the new house and then sell his at leisure, at which time presumably the loan would be repaid.

Depending on how long the exercise takes, “temporary” could be a year or more. I’d urge you to consider measures to deal with the unexpected- sorry to be blunt but-

1. It’s not unknown for elderly widowed parents to meet someone new and remarry;
2. It’s not unknown for elderly people to suffer a sudden downturn in health, or worse;
3. If you have siblings or there are other beneficiaries of your father’s estate is there any likelihood of an inheritance dispute?

Measures can be taken in advance to address these possible issues and protect the OP. Probably the most obvious would be to ensure the loan is properly documented and ideally secured by a charge over the property. Definitely take advice on this.

[Captain Morgan]

If you are buying a second home with the intent to sell your first later, you have (if I recall) eighteen months to reclaim the higher rate of Stamp incurred on the purchase of the "second home".

From the gov website

You must have sold your previous main residence within 3 years of buying the new property to qualify for a refund


https://www.gov.uk/government/public...nal-properties