Looking for advice on parent downsizing home, etc

Z

Z100

Guest
Could really do with some advice - the rough details:

Elderly parent selling home worth around e850,000 - looking to downsize but the area she will be moving to is much more expensive, so even though her new home will be much smaller it's likely to cost anywhere between e700,000 and e850,000. Honestly, this isn't extravagance, she's confined to looking in this particular area for various reasons.

Moving with the parent is a 'child' who bought their first home two and a half years ago, is now selling it to help make the move possible. Likely to get around e380,000 for the house, which is a e100,000 profit on what they paid.

Just looking for advice on what might be the best buying options for parent and child. Stamp duty, presumably, will be 9%? Parent thought she heard talk on TV the other day about downsizers being made exempt from stamp duty, but as far as I know that's only a proposal by the Labour and Green Parties ahead of the election. So not much pointing in holding one's breath!

Child can afford mortgage of e300,000ish - would that be the best way to go, eg

New house: 750,000 (+ stamp duty) = 817,500
Parent pays: 517,500 - owns roughly two thirds of house
Child takes out 300,000 mortgage - owns roughly one third of house

Does that make most sense?

Any suggestions/advice would be HUGELY welcomed, eg a better way of doing this. Thanks.
 
I think its very hard to give advice on this one. Frankly both parent and child should obtain independant advice before committing to this. Both should be able to give frank instructions on what their expectations are of this move and be given legal advice on their entitlements and the difficulties that could arise in this type of arrangement.
 

Thanks for that Vanilla. I should have made it clear that the actual ownership of the house isn't a problem at all, ie who owns how much of it, that's something that will be sorted out legally once the house is bought so that there will be no issues later on.

It's more about how best it would be to finance the purchase, what might be the best options. Do parent and child have exactly the same standing now, eg with stamp duty, etc. Thanks.
 
Obviously the only way to create joint ownership in this manner is a Tenancy in Common which in theory is fine but in the scenario you have given can lead to problems in the future. If the parent is elderly what will be the position following death and other siblings etc? It really is necessary to get both legal and tax advice before progressing further. Again if the "child" wished in the future to fly the nest there could be major difficulties. Also in the event of a falling out etc. All of these potential problems should be addressed before progressing. Anticipation and awareness of pitfalls can save a lot of future worries.
 

Thanks Bren, appreciate the reply.

Lots of thought has been given to the potential problems you mention, you read so much about this kind of situation ending up in family warfare, so both parties are really conscious of that and will get legal advice on how best to deal with it, ie to have solid legal agreements in place that make it clear who owns what percentage, whether the house should be sold at a later date, if the child should have an option to buy out the parent's percentage, etc.

For now it's just a question of deciding how the move can best be handled financially between parent and child. The parent could afford to buy 100% of the house, the child couldn't, but the child is anxious to have a stake in it so they at least own something after selling their own home.
 
The first thing that they will have to decide themselves is what percentage each will own. That might be dictated somewhat by the amount the child can borrow? Or possibly not if the child decides to borrow less than their full capacity. But in any case that is not something that we can advise on- that is something for them to decide themselves.

Anything over 635000 is at 9% stamp duty unless new build in which case possibly lower.

Obviously if each sell their ppr, no CGT.
 
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