# Transfer of house to children (minors).



## csirl (15 Jan 2011)

Question a friend has asked me to ask:

Currently living in family home in own hometown. Is moving to another part of the country for work reasons. Doesnt want to dispose of current home as its been in the family for years.  

Rental market in hometown is dead - will not get enough after tax rental income to cover the mortgage as will be taxed at 50%+ etc. Cannot afford to make a lose when renting out as has to pay rent at new location (and in time will probably purchase a new house at new location). House is not in negative equity.

One option he is considering is to transfer the house into his 2 children (both minors). As children have no other income, and therefore will be paying lower tax, rental income will cover the mortgage. He's more interested in keeping the house in the family than getting an income out of it, so in the event that there was a profit out of the rental, he's quite prepared to leave it in a college fund for the 2 children. Also prepared to leave house in children's name long term and allow them get the benefit as adults.

He's aware that there will be some legal fees etc. and believes bank is happy to allow transfer provided mortgage is paid (though may seek that he be a guarantor).

He's worried that his analysis sounds too good to be true i.e. that tax can be avoided on rental income with the transfer - is there anything he's missing? Can this be done?


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## twofor1 (15 Jan 2011)

csirl said:


> and believes bank is happy to allow transfer


 
The house is security for your friend’s mortgage, the bank will not agree to ownership of the house being transferred to anybody else until the mortgage is paid in full.

If you are talking about the children taking a mortgage to buy the house, being minors this would not be possible, they would have to be 18+ and meet the banks standard lending criteria.


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## Brendan Burgess (16 Jan 2011)

In general, this is very messy. The kids will no longer be first time buyers, although the value of this is low. He will no longer own the property, but he will have to pay the mortgage on it. Kids fight with each other and their parents. 




> will not get enough after tax rental income to cover the mortgage as will be taxed at 50%+ etc.



I don't understand this. Can you provide the numbers please? 

He will be taxed on his rental profits which are roughly 

Rental income - 75% of mortgage interest. 

So he should pay much tax on the rental income, unless he is making a profit. 

He may not be able to cover the capital repayments, but maybe the bank will allow him to switch to interest only.


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## csirl (19 Jan 2011)

Dont know his exact finances, but I believe the mortgage is old enough that its mainly capital being paid, so very little interest write-off. He currently pays the higher rate of tax on his PAYE income, so I assume any additional income i.e. rental profit, will be at the higher rate plus levies etc. - over 50%.



> If you are talking about the children taking a mortgage to buy the house, being minors this would not be possible, they would have to be 18+ and meet the banks standard lending criteria.


 
This occurred to me also - would be a 'ninja' mortgage.


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## Penelopy (31 Jan 2011)

*Transfer house to minors*

My question is similar. I would like to transfer my house in the UK to the children. I am non resident. This would mean we could rent and use the income for school fees, without me having to complete a UK tax return as well as one in my country of residence. Is this simple? There is no mortgage.


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