Can you gift property with a mortgage?
Yes, you can gift a property with a mortgage but the new owner will need to get the outstanding mortgage on the property from the same lender or a new mortgage lender.
If the new owner is not eligible for a mortgage from anybody then they may simply have to buy out the mortgage lender with cash.
You won't be allowed to pass on a property and have the mortgage in your name.
An alternative to simply gifting the property could be to add the person to your mortgage but you will have to ensure you will still meet the mortgage lenders affordability as the mortgage lender may reassess both of you and while they may not pay to much attention to the person being added. They may reassess you and decline adding anyone else to the mortgage.
If this happens then you can simply speak with a mortgage broker to see if there are any other mortgage lenders who will be able to lend to you and add a joint owner to the property.
After you add a joint owner to the mortgage you will still not be able to gift them the property with a mortgage on it if they don't meet the mortgage lenders eligibility requirements to pay off the mortgage on their own.
When can you not gift property with a mortgage?
There are some scenarios where you won't be able to gift property with a mortgage but this will differ from lender to lender so you should check with your specific mortgage lender.
The scenarios where you may not be able to gift property with a mortgage include:
If the property is buy-to-let
If the mortgage will have 3 or more borrowers
If a person being removed from a mortgage will still be living in the property
What happens when you gift property with a mortgage?
If the mortgage lender agrees to the property being transferred then you will need t contact the land registry to inform them that there has been a change in ownership on the property
and to register the new details to the title of the property.
The person getting the property as a gift may also be due stamp duty on the property. They should check this with their conveyancer.
HMRC’s take on gifting property “ If you get a property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold. “
Are there any tax obligations when gifting property with a mortgage?
When you gift a property to someone you may be liable for capital gains tax based on the circumstances surrounding the gift. You should check with your tax advisor on this,
When you gift a property it will remain as part of your estate for inheritance tax purposes for 7 years. If you die within that 7 years then the person may need to pay inheritance tax on the property.
If you remain living in the property, this can further affect your liability for inheritance tax.
Income tax may also be due when gifting property.
When a rental property is given to a child who is under 18, the person who gave it away is still taxed on any rental income, even if that income technically goes to the child.
This doesn't apply if the person receiving the gift is an adult, whatever their relationship to the giver.