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Upon inheriting a house you may be struck with an array of confusing and conflicting thoughts concerning what to do with it. Should you sell it, keep it or move in? Can you refuse it? What else is there to consider? The decision requires planning, thorough consideration of available options, and the confidence that your final decision will benefit all it affects.
This post assumes you’ve already been granted a probate and own the legal rights to the inherited home. If you haven't, click here for more information on how to get this sorted.
Why Might You Sell?
It can provide you with a substantial amount of money to put toward your own home, or other things you may want.
The house requires little repair and you can afford additional maintenance until time of sale. Alternatively, it’s too much of a fixer-upper and you don’t want to invest your energy and money.
There is no mortgage attached.
Prolonging the process is not an option and you don’t mind waiting months for a sale.
It’s just not practical to keep it. For example, the home is located in another city.
You avoid inheritance tax because its value is less than £325,000 (if left to a spouse or civil partner) or £425,000 (if left to children or grandchildren).
You may even consider selling to a quick house buying company such as webuyanyhouse for the following reasons:
To avoid estate agent fees and associated costs.
The house is worth less than the amount owed (e.g. due to debt).
You want to be rid of the house and move on with your life as quickly as possible.
Are there disadvantages to selling?
Until you’ve exchanged keys you are still responsible for any home insurance, bills, taxes and associated maintenance. If there is a mortgage, you may need to keep paying it. This could prove costly, especially if it takes a long time to sell through an estate agent.
If the property has been left to more than one party (e.g. you and your siblings) there could be disagreements if, say, they want to sell, but you don’t. A solution could be you rent the place from them, and we’ll return to this option later.
Income Tax and Capital Gains Tax on the profit you make from sale.
You lose a part of your family history.
If you’re unsure whether selling is right for you, we suggest you take the following steps:
Conduct a Home Survey to determine how much repair your home needs.
Discover how much money is owed in terms of debt, loans and the mortgage.
Compare current and potential market value.
Understand the current property market.
You’ll then have a clearer picture of how much selling the house will cost you, and the pros and cons of this.
Renting The House Out
Why might you become a landlord?
It allows you to keep the house.
It gives you a source of income.
The market may improve, giving you a higher value upon sale.
Tax deductions on expenses such as gardening, cleaning and replacing water pipes and damaged furniture.
What disadvantages are there?
You’ll have responsibilities including fire and gas safety, ensuring electrical and gas appliances are maintained and determining whether potential tenants have the right to rent property.
You’ll be responsible for all repairs and damages caused by your tenants, and emergencies such as burst pipes and broken boilers. This is especially difficult to deal with if the house is not nearby.
You must tell your mortgage lender, potentially having to pay a higher rate of interest.
Inform HM Revenue & Customs about income you receive so they can inform you what tax you owe.
We mentioned earlier that another option was renting from the relative or person you share the home with (where applicable). This could be cheaper than buying the house from them and keeps the home in the family.
What are the advantages of moving into the house?
It gives you time to sort through the deceased belongings.
In total, it may be cheaper than the home you currently have, leading you to sell your original home.
Cost of repairs
If you decide to keep your original home too, then you’ll have additional tax to pay.
Why might you refuse the house?
The home needs major repair.
The potential taxes are high.
The mortgage is too high.
You just don’t want to deal with the house.
It’s important to note that you don’t get a say what happens to the house if you refuse it.
What else should you consider?
Does the house already have tenants?
Will they remain in the house? Could they pay you rent? Do you want them gone? Discussion is key.
All the associated taxes
Inheritance, Income and Capital Gains Tax
Insurance you may need
If the house will be unoccupied for over 30 days, then this is a good idea.
This can cover building insurance, protection against loss and damage cover for example.
Second home insurance
Though this blog is not a comprehensive guide on what you should do with your inherited house, we hope it has helped you see the reasons behind each option and given you a clearer direction in which to take. As with anything involving inheritance and property, ensure you carefully assess your options, talk them through with a solicitor and reach a choice you feel comfortable with.