Taking Over a Mortgage from Parents in the UK: A Complete Guide

Life can bring unexpected changes, especially when it comes to property ownership and managing mortgages. One such scenario is the need to transfer a mortgage, whether it involves taking over a mortgage from your parents in the UK, adding a new person, removing someone, or swapping one borrower for another. This type of mortgage transfer can occur at any stage during the mortgage term, including when you are considering remortgaging.

Initially, the process of taking over a mortgage from parents might seem complex, but with the right guidance and expert knowledge, it can be straightforward and manageable. There are several reasons why you might need to assume a mortgage, particularly when dealing with family arrangements, and this guide will help you navigate these circumstances. For personalized advice or further assistance, don’t hesitate to consult an expert mortgage broker who can provide guidance tailored to your unique situation.

Understanding the Process of Taking Over a Parent’s Mortgage in the UK

In a fact sheet published by the Building Societies Association (BSA) on the 7^th of February 2022, mortgage holders are strongly advised to contact their lender immediately if they face short-term or long-term challenges in making their mortgage repayments. Building societies emphasize that repossession of the home is considered only as a last resort.

However, if your parents are struggling to keep up with their monthly mortgage payments due to physical or mental health issues, such as frailty or dementia, it may be wise to take action well before any discussion of repossessing the family home. One possible solution is to take over your parents’ mortgage, often referred to as a parental mortgage transfer or assuming a mortgage.

But is taking over a mortgage from your parents in the UK possible? And if so, how straightforward is the process to inherit a mortgage in the UK or assume the mortgage?

Post Topics

Can I take over my parents mortgage on a house – Quiz?

Is it possible to take over my parents’ mortgage on a property?

What other options do I have if I want to take over my parents’ mortgage?

What if my parents gifted me the house?

Residential or long-term care home fees

Inheritance tax liabilities

Next Steps

FAQs

Is it possible to take over my parents’ mortgage on a property?

The reassuring news is that, yes, it is typically possible to take it over – but you must be warned from the outset that it will not be a simple question of just transferring your name onto the mortgage deedsLegal documents that prove ownership of a property. and assuming responsibility for the repayments.

A parental mortgage transfer is often considered when parents want to pass on property ownership to their children without selling the home.

Whether you are taking over an existing mortgage or seeking a new mortgage in your own name, you have to own either whole of the property in question – or, at least, a share in it.

For any issue regarding the mortgage to be taken forward, therefore, you need to be registered as an owner of the property with the Land Registry. If you own a share of the property – with a sibling, for example – then both of your names will need to be registered under the appropriate Land Registry records.

Whether it is you alone or in a share with a sibling or siblings, your parents, of course, will need to complete the transfer of a share of ownership in the relevant names. That is a complicated legal step best performed by instructing solicitors to act on your family’s behalf.

If you’re looking to inherit a mortgage in the UK, it’s important to understand the legal and financial implications

Also, interested in learning about Joint Mortgage applications in the UK, feel free to read about Joint Mortgage applications with a sibling on our blog.

What other options do I have if I want to take over my parents’ mortgage?

Probably the most obvious way of taking over your parents’ mortgage is through “transfer of equityTransferring ownership of a property from one party to anoth...”. This will see your name added to your parents’ existing mortgage, subject to your meeting the lender’s standard checks on your creditworthiness and ability to repay the loan. A transfer of equityThe difference between the value of the property and the amo... can occur on any existing mortgage whereby a new owner takes complete responsibility and a previous legal owner(s) can be released from any debt and obligation or as a remortgageRefinancing an existing mortgage with a new mortgage.. A remortgage is when a legal owner(s) replaces an existing loan with a better and organised arrangement. A transfer of equity can occur on your current mortgage deal but there is always a case that the current mortgage lender may reject your application. In case a current lender rejects your loan application, you would then need the help of a mortgage broker for the legal work involved in adding your name to the title deeds.

Alternatively, if you already have a mortgage on your own home, you might want to increase your borrowing so that you have the funds either to repay your parents’ loan in full or to purchase a share in the family home – along with any siblings, for example.

Yet a further solution may be to raise a completely new mortgage either to buy out your parents’ share of the equity or purchase some other share in the property. Any lender will insist on the usual credit checks, of course, to satisfy themselves of your ability to repay the loan.

Whatever your preferred solution, you may want to ensure that you have dependable legal and financial advice. You can always contact our mortgage advisers to help you with your application.

Read about joint mortgage applications with bad credit on our blog posts.

What if my parents gifted me the house?

That professional advice on the legal and tax implications of any ownership is equally true if your parents decide to gift you the family home.

As the homeowners, they are allowed to gift the property to their children at any time, even if they continue to live in it as their main home.

There are several implications arising from any such transfer of ownership:

Capital Gains Tax (CGT)

• if your parents have gifted you the family home – or a share in it – but you do not live there, the property is regarded as your investment;
• therefore, if the property appreciates in value after the date on which any transfer of ownership was made, you will be liable for CGT if and when you sell the home or your share in it;
• similarly, any second, holiday home or investment property gifted to you by your parents will also be subject to CGT if it appreciates in value after the initial transfer of ownership;

Residential or long-term care home fees

• many parents may feel that gifting you the family home will avoid them having to contribute to the costs of residential or long-term care home fees in their old age;

• as explained, the local authority will examine whether your parents engaged in a “deliberate deprivation of assets” in gifting you the home in order to avoid paying the cost of long-term care;
• if that is the case, the local authority can treat your parents as though they still owned the property, effectively reversing its transfer;

• in short, your parents’ transfer of ownership of the family home cannot avoid local authorities’ calculation of the cost of long-term care;

Inheritance tax liabilities

• the family home is sometimes gifted to the children because, seven years after any such transfer of ownership, the property is  usually exempt from inheritance tax;

• beware, however, that if your parents gifted the home to you but continue to live there, it is regarded as a “gift with reservation of benefit” and remains part of your parents’ estate even if they die after seven years have elapsed following the transfer of ownership – inheritance tax is still due.
• there are ways that you may be able to have a more tax-efficient solution in cases such as this, so we recommend you seek professional advice.

Also, read about remortgaging an inherited property on our website.

Can I transfer my mortgage to my son?

Yes, it is possible to transfer your mortgage to your son or daughter if they can afford to take it on.

The process of transferring a mortgage can be complex and there are a number of considerations that must be taken into account, including the age of the loan, interest rates and fees.

To transfer your mortgage to someone else, your lender will need to approve the transfer. In addition, you will need to provide evidence of the new borrower’s financial circumstances and creditworthiness.

You may also be required to pay an early repayment chargeA fee charged by lenders if the borrower pays off the mortga... if you are transferring a mortgage that is not yet close to its end date.

It is important that both parties understand the implications of a mortgage transfer before going ahead with the process. We recommend that you seek professional financial advice before making any decisions.

Next Steps

If your parents are having difficulties repaying their mortgage – or simply want to transfer ownership of the family home to you – you can formally add your name to their existing mortgage or raise the funds to pay off your parents’ mortgage for them.

As has been seen, however, whatever course of action you choose, there remain numerous legal and tax issues on which you will need reliable and independent professional advice.

If you are looking to take over your parent’s mortgage, at NeedingAdvice.co.uk we can discuss your options with you.

FAQs

Can I take over a mortgage from my parents?

Yes, you can take over a mortgage from your parents if a mortgage lender approved your application. There are cases where the current lender of the mortgage rejects such applications because of the affordability standpoint. If you are facing such issues, you can always contact a mortgage broker who can help you with your loan application.

Can I take over my parent’s loan with a bad credit score?

It is possible but the process won’t be straightforward because of your adverse credit history. There are some bad credit mortgage providers who can help you with you application. It is always better to do a credit checkA check of a borrower's credit history, which is used by mor... of your current credit history before starting your application.

What happens when both my parents pass away?

After your parent dies, someone else will be responsible for distributing your parent’s assets in accordance with their wishes. Your parent’s estate must pay off the mortgage before you can move into the house. If you want to stay there after your parent dies, you should ask the bank if you can become a co-owner. If you do decide to become a co-owner, you will need to provide proof of death. The benefit is that there is usually no CGT payable when the property transfers. However, it’s not always that simple. In some cases, you may be required to pay a fee to assume the mortgage. You may also need to go through a probate court. This could cause huge family disputes.

You can read about remortgaging on inherited properties on our blog.

How to Remove a name from a joint mortgage?

The first thing you need to do is to get rid of the joint tenancy. To do this, you need to apply to the bank for permission to remove one of the names. Once you have done this, you can then proceed to make the necessary changes to the mortgage agreement. You will need to inform the other party that they will now need to repay the debt alone. Bank will access your credit score and ask for bank statementsA record of a borrower's financial transactions often requir... and payslips before removing another person’s name from a joint mortgage.

Read about how to buy out a partner from your mortgage on our blog.

Do I need to pay stamp dutyA tax paid by the buyer when purchasing a property. while taking over my parent’s mortgage?

You may need to pay a stamp duty while transferring a mortgage to a partner or family member or removing one applicant from the joint mortgage. It all depends on the transfer of equity type and your marital status. It’s always better to take legal advice before starting your application with the current lender.

What are the inheritance tax implications of a gifted transfer of equity?

Speak to a solicitor about transferring equity in your home before starting your application with your current lender to ensure your family gets the house after your death. Joint mortgages are the easiest way to do this. You won’t be taxed on any equity transferred by a joint mortgage, but it doesn’t mean you’re safe from inheritance tax.

Can you transfer a mortgage to a family member?

Yes, you can transfer a mortgage to a family member but you may need to pay stamp duty. There are also some other rules that you need to understand before transferring your mortgage to a family member. It is always better to contact a mortgage broker for a piece of specialist advice.

Do you have to pay stamp duty when transferring a mortgage to a family member?

This depends on whether you are transferring an interest in land or a building. If you are transferring an interest in land, then you don’t need to pay stamp duty as long as you meet certain criteria. If you are transferring a building, then you need to pay stamp duty depending on the value.

Is there any eligibility check when transferring your mortgage to a family member?

Yes, you need to make sure that the person you are transferring the mortgage to has enough income and savings to cover the mortgage repayments. Also, they need to be able to afford the monthly payments. They also need to be able to prove that they own the property outright. Mortgage transfer is always a complicated task for an individual. It is always better to consult a financial adviser before starting your application for a mortgage transfer.

How much does it cost to transfer a mortgage to a relative?

The price of transferring a mortgage varies depending on the type of mortgage you have. For example, if you are transferring a fixed rate mortgageA type of mortgage with an interest rate that is fixed for a..., then the price would depend on how much equity you have in the property. If you are transferring the mortgage while still living at home, then the price would be lower than if you were moving out. A good mortgage broker will explain all these details to you so that you know what you’re getting yourself into.

What is the process of taking over a mortgage from a family member?

The process of taking over a mortgage from a family member is not straightforward. Firstly, you will need to speak to your current lender first to find out if you can take over a mortgage from a relative. The process of transferring a mortgage to a relative is very similar to transferring a mortgage to a friend or colleague. You will need to provide them with proof of identity and proof of addressEvidence of a borrower's current address, such as a utility .... You will also need to show them the original documents proving that you hold the mortgage. Once you have done all this, you will need to get a letter confirming that you can take over the mortgage. This letter should state that you are eligible to take over the mortgage and that you will be responsible for paying off the loan.

If you want to learn more about family mortgage transfer to a close relative, please contact our team of expert mortgage brokers.