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Selling property to children at reduced value


willh

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If a parent wanted to sell a property to their child for half of the value of the property, helping them to get onto the property ladder, would the equity in the house be enough to count as a deposit for the mortgage?

For example, if the property is valued at £300k but the parent sells to the child for £150k, this leaves £150k positive equity in the house. Does this mean that the child would not need to put a cash deposit down? 

Thanks in advance for all advice! 

 

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Yes, this is widely accepted by most lenders and is known as a "Family Concessionary Purchase".

Your example is correct, however i would generally recommend not being over ambitious on the valuation because thats what the stamp duty is dependant on... It needs to be "market value", so you cant sell it for nothing but value is reasonably subjective. The less equity however the higher the loan to value, and therefore the more expensive the subsequent mortgage although the main thresholds are 60/65% and 75%, there isnt usually buch benefit in terms of rates below 60% LTV.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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19 hours ago, willh said:

If a parent wanted to sell a property to their child for half of the value of the property, helping them to get onto the property ladder, would the equity in the house be enough to count as a deposit for the mortgage?

For example, if the property is valued at £300k but the parent sells to the child for £150k, this leaves £150k positive equity in the house. Does this mean that the child would not need to put a cash deposit down? 

Thanks in advance for all advice! 

 

Yes this is fine, this is classed as a concessionary purchase. Your child would still need to pay stamp duty on the true value of the property, and some lenders will require your child to put down some cash towards the purchase, but there are lenders out there who are happy to use the equity as the deposit. 
Get in touch if you would like to know more!

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