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Hive mind - Capital Gains Tax question

My dad has decided to move house.

He has come up with a plan to get a huge bridging loan of £400k, even though he hasn't even got an offer on his own house. He really really wants to move next door to family. Or vice versa - hard to say.

He would then own two houses and his primary residence would be the new house. The old one has gone up in value 40,000% since he bought it.

We are heading for a second lockdown, end of transition period, and winter.

(1) Any unintended consequences of his plan? Could he get hit by CGT on the old house?
(2) I might need to dig him out of a hole if he is £25k and 6 months into a bridging loan, by taking out a mortgage. The deposit I'd need would already be in the house. (a) is this even possible and (b) does it change the answer (1)?

I do not need to be told that taking on the biggest debt of your entire life for an indeterminate period, with no real exit plan, aged 80, is a bad idea. Is it too much to hope that the loan will be declined, I wonder.

Posts

  • TheBigBeanTheBigBean Posts: 11,833
    You may get more reliable info from Google, but I think you have three years before capital gains would kick in.

    I'd recommend offering the current house for a sensible price so it sells. You could even auction it.

    Why would you need to bail him out? The lender would just repossess the other house.
  • First.AspectFirst.Aspect Posts: 5,380

    You may get more reliable info from Google, but I think you have three years before capital gains would kick in.

    I'd recommend offering the current house for a sensible price so it sells. You could even auction it.

    Why would you need to bail him out? The lender would just repossess the other house.

    Well yes, but even though he has dementia and is being coerced I don't think his underying wishes would reflect that.

    A sensible valuation would help, rather than a "please use OUR estate agent" valuation.

    I have everything crossed that he gets an offer that turns the bridging loan into an actual bridging loan, rather than a dead end loan.

    He'll need the money for his care. He just doesn't know that.
  • orraloonorraloon Posts: 7,492
    Being coerced? Bzzzt. Alert. This does not smell good.
  • First.AspectFirst.Aspect Posts: 5,380
    edited October 2020
    orraloon said:

    Being coerced? Bzzzt. Alert. This does not smell good.

    Nope. The general plans are fine, but in a million years he wouldn't take a bridging loan. He thinks it is a way to buy now and pay 4 weeks later.
  • Dorset_BoyDorset_Boy Posts: 3,343
    Dementia - hmm, has he mental capacity? Is there a Power of Attorney in place?
  • orraloonorraloon Posts: 7,492
    Sell first. Rent. Buy later. Don't follow the bizarre Ingerlish system.
  • First.AspectFirst.Aspect Posts: 5,380

    Dementia - hmm, has he mental capacity? Is there a Power of Attorney in place?

    Possibly and no. I've tried. Working on it, but best I could do is hand the reigns to the current influence. Don't see that as an improvement.
  • Dorset_BoyDorset_Boy Posts: 3,343

    Dementia - hmm, has he mental capacity? Is there a Power of Attorney in place?

    Possibly and no. I've tried. Working on it, but best I could do is hand the reigns to the current influence. Don't see that as an improvement.
    It doesn't sound like a good situation - no PoA, elderly gentleman with dementia, coercion - clear case of vulnerability. Hopefully a solicitor involved in the legal process of the sale might pick up on it and question what is going on. Any idea who would be providing the bridging finance? If so, suggest you speak to them explaining the vulnerable position your father is in.
  • First.AspectFirst.Aspect Posts: 5,380

    Dementia - hmm, has he mental capacity? Is there a Power of Attorney in place?

    Possibly and no. I've tried. Working on it, but best I could do is hand the reigns to the current influence. Don't see that as an improvement.
    It doesn't sound like a good situation - no PoA, elderly gentleman with dementia, coercion - clear case of vulnerability. Hopefully a solicitor involved in the legal process of the sale might pick up on it and question what is going on. Any idea who would be providing the bridging finance? If so, suggest you speak to them explaining the vulnerable position your father is in.
    Its the nuclear option.
  • orraloonorraloon Posts: 7,492
    Hmmm. Stuff going on. A current influence does not sound positive. Is he open to you / responsible and honest family and / or close friends helping? My father went down the vascular dementia road and ended his days in a care home. However he much earlier in process allowed my brother and I to manage his finances, which we did with his not our, not in the immediate sense, interest at heart.

    These situations can get very shite.

    Tbh I, much younger and (I think) still compos mentis, am in process of sorting out PoA so my daughter and/or brother could operate for me if necessary. After all it only needs some 'kin [email protected] barsteward driver to knock me off...
  • Dorset_BoyDorset_Boy Posts: 3,343
    PoA's are really easy to set up and really inexpensive and everyone should have one. Set them up through the .gov website.
  • First.AspectFirst.Aspect Posts: 5,380
    Yeah I have mine set up already.

    Problem is the dad is a propper old school beligerant sod, or he was, so refused point blank. If he was Texan he wouod have a gun and shoot at the postman.

    Bad influence is my brother. Lives half an hour away, whereas I am a days drive away.

    Hes not that bad, just fixated on giving his son a couple of years of grandad next door. He would probably end up moving in to avoid his wife.

    Which is fine, if grandad understands what he is doing to make that happen.

    I would much rather quietly line up a plan B in case it all goes wrong. And know in advance if he is stiffing himself for 39995% capital gains tax.

    I can potentially afford to buy his new house. Brother cannot. Brother can pitentially look after him. I cannot.

    If theres a show stopping tax reason I will step in. Other than that play along.
  • slowmartslowmart Posts: 4,036
    edited October 2020
    @ FA, from what you’ve said I doubt your father will be able to get a mainstream lender to support his ambition. The eligibility for a mortgage is becoming ever more narrow and that’s without the lockdown we are heading for. Given the news today that the rate of infection is four times worse than the worst case set by Boris, but I digress. Returning to the point there is a massive focus within the industry on responsible lending which means nearly all reputable lenders won’t be interested.

    Unfortunately if mainstream lenders are not an option then the only choice is lenders that aren’t too fussy about defaults. Why? They factor the default into the deal and make more money on the default than the original interest.

    WhIch is fine to a degree if you know you’re swimming with sharks, you figuratively put a anti shark suit on and pour a ton of shark repellant in the water or in the real world, hedge your position against worst case.

    Hedging means the funds to bail your dad out worse case and in this market that could be a few years unless you take a hit on the sale price. Plenty of cash swilling around from these bottom feeders who buy from either distressed buyers or relatives wanting their grubby hands on the money and are willing to take the hit as it means nothing to them except the sum they can get.

    Add Covid and most underwriters will run a mile before offering a fee anywhere near realistic given your fathers age.

    I hope this helps shine a light on some of the pitfalls, especially if you have to deal with companies operating within the high risk demographic.

    “Give a man a fish and feed him for a day. Teach a man to fish and feed him for a lifetime. Teach a man to cycle and he will realize fishing is stupid and boring”

    Desmond Tutu
  • First.AspectFirst.Aspect Posts: 5,380
    slowmart said:

    @ FA, from what you’ve said I doubt your father will be able to get a mainstream lender to support his ambition. The eligibility for a mortgage is becoming ever more narrow and that’s without the lockdown we are heading for. Given the news today that the rate of infection is four times worse than the worst case set by Boris, but I digress. Returning to the point there is a massive focus within the industry on responsible lending which means nearly all reputable lenders won’t be interested.

    Unfortunately if mainstream lenders are not an option then the only choice is lenders that aren’t too fussy about defaults. Why? They factor the default into the deal and make more money on the default than the original interest.

    WhIch is fine to a degree if you know you’re swimming with sharks, you figuratively put a anti shark suit on and pour a ton of shark repellant in the water or in the real world, hedge your position against worst case.

    Hedging means the funds to bail your dad out worse case and in this market that could be a few years unless you take a hit on the sale price. Plenty of cash swilling around from these bottom feeders who buy from either distressed buyers or relatives wanting their grubby hands on the money and are willing to take the hit as it means nothing to them except the sum they can get.

    Add Covid and most underwriters will run a mile before offering a fee anywhere near realistic given your fathers age.

    I hope this helps shine a light on some of the pitfalls, especially if you have to deal with companies operating within the high risk demographic.

    Thanks. You would hope he simply doesn't meet the criteria.
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