Q My mother is 64 and still working full time in London. She owns a property with no mortgage, which she bought in 2001. When she retires next year she wants to live on the Kent coast, and recently found somewhere she wants to buy. She wants to purchase this property and then move in upon retiring, when she will sell the London property to clear the additional mortgage on the Kent property and be left with a lump sum she can use to live on as she has very low pension provision.
Would this arrangement leave her vulnerable to paying capital gains tax (CGT) on her current home? Which would be the best mortgage for her? And what is the best way of minimising the tax she pays on this, as it would be illogical for her to pay huge capital gains when she is merely moving home, albeit with a year's gap between move dates. JP
A Your mother shouldn't face a CGT bill when selling the London home, provided she sells it within three years of moving out of it. Assuming the property in London has been her home, and she has lived in it for all the time she has owned it, she will qualify for what HM Revenue & Customs (HMRC) calls private residence relief, which makes the gains on the sale of a home tax free. There could, however, be a CGT bill if she has let the property at any time. More information is available in Help Sheet 283 on the HMRC website.
As far as getting a mortgage goes, your mother would be better off raising the money to buy the house in Kent by taking out a mortgage on her London home. If she took out a mortgage on the house in Kent she would need to have a cash deposit to put towards the purchase. By mortgaging the London home she should be able to raise the full amount she needs to buy the house in Kent, because I am assuming the London property is worth more than the house she wants to buy. If this is the case, the loan-to-value ratio will be quite low, which means your mother should have access to better mortgage deals.
Her age may deter some lenders, but if she makes it clear she plans to pay the mortgage off when she retires she should be able to get a mortgage. As she intends to pay it off rather quickly, she should steer clear of deals which make a charge for early repayment.
Source http://www.guardian.co.uk/
Would this arrangement leave her vulnerable to paying capital gains tax (CGT) on her current home? Which would be the best mortgage for her? And what is the best way of minimising the tax she pays on this, as it would be illogical for her to pay huge capital gains when she is merely moving home, albeit with a year's gap between move dates. JP
A Your mother shouldn't face a CGT bill when selling the London home, provided she sells it within three years of moving out of it. Assuming the property in London has been her home, and she has lived in it for all the time she has owned it, she will qualify for what HM Revenue & Customs (HMRC) calls private residence relief, which makes the gains on the sale of a home tax free. There could, however, be a CGT bill if she has let the property at any time. More information is available in Help Sheet 283 on the HMRC website.
As far as getting a mortgage goes, your mother would be better off raising the money to buy the house in Kent by taking out a mortgage on her London home. If she took out a mortgage on the house in Kent she would need to have a cash deposit to put towards the purchase. By mortgaging the London home she should be able to raise the full amount she needs to buy the house in Kent, because I am assuming the London property is worth more than the house she wants to buy. If this is the case, the loan-to-value ratio will be quite low, which means your mother should have access to better mortgage deals.
Her age may deter some lenders, but if she makes it clear she plans to pay the mortgage off when she retires she should be able to get a mortgage. As she intends to pay it off rather quickly, she should steer clear of deals which make a charge for early repayment.
Source http://www.guardian.co.uk/
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