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  • FIRST POST
    • andy230uk
    • By andy230uk 15th Sep 17, 11:59 AM
    • 3Posts
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    andy230uk
    Can we get a buy to let mortgage to move into at a later date, and avoid stamp duty?
    • #1
    • 15th Sep 17, 11:59 AM
    Can we get a buy to let mortgage to move into at a later date, and avoid stamp duty? 15th Sep 17 at 11:59 AM
    Hi All,

    I own a flat in Leeds where my fianc!e and I live. We’re happy there for the immediate future but anticipate moving into the suburbs within the next 2 or 3 years.

    I’d like to keep hold of the flat and rent it out, and have calculated I can afford to do this. The issue is that we do not want to incur the extra 3% rate of stamp duty on a second home which I calculate to be £10,000 on a £250,000 property (as opposed to £2,500 if I didn’t own another property).

    The only solution I can see to the stamp duty issue is to avoid a joint mortgage and for my fianc!e to buy the second property on her own. I understand this would have to be done before we marry. I like to think it would be a ‘joint’ purchase for all intents and purposes with me sending her my half of the deposit and mortgage repayments. I appreciate the big downside here is that this is less legally sound than a joint mortgage and have had discussions with a solicitor about how to ensure both parties are protected.

    Since we don’t want to move just yet but would prefer to make the purchase before we marry (date TBA) to avoid stamp duty, we’re looking at getting a buy to let mortgage on a place that we’d like to live in further down the line. At the end of the initial buy-to-let mortgage term, we’ll switch it to a residential mortgage and move in. I’d then rent out the flat where we currently live. This could have the added advantage of buying a property soon, at a time where the prices seem to be rocketing.

    Is this a feasible plan if my fianc!e can get a buy to let mortgage on her own (she earns around £43,000 and we have a deposit of around £50,000)? Is it easy enough to switch mortgages from buy-to-let, to residential at the end of the mortgage term? Are there any flaws in our masterplan?

    Any help or advice would be much appreciated,

    Thanks,
Page 1
    • Guest101
    • By Guest101 15th Sep 17, 12:04 PM
    • 15,128 Posts
    • 14,763 Thanks
    Guest101
    • #2
    • 15th Sep 17, 12:04 PM
    • #2
    • 15th Sep 17, 12:04 PM
    Hi All,

    I own a flat in Leeds where my fianc!e and I live. We’re happy there for the immediate future but anticipate moving into the suburbs within the next 2 or 3 years.

    I’d like to keep hold of the flat and rent it out, and have calculated I can afford to do this. The issue is that we do not want to incur the extra 3% rate of stamp duty on a second home which I calculate to be £10,000 on a £250,000 property (as opposed to £2,500 if I didn’t own another property). - That's unfortunate, better sell it then

    The only solution I can see to the stamp duty issue is to avoid a joint mortgage and for my fianc!e to buy the second property on her own. - you would still pay CGT I understand this would have to be done before we marry. - Why? I like to think it would be a ‘joint’ purchase for all intents and purposes with me sending her my half of the deposit and mortgage repayments. - so just a tax dodge? I appreciate the big downside here is that this is less legally sound than a joint mortgage and have had discussions with a solicitor about how to ensure both parties are protected.

    Since we don’t want to move just yet but would prefer to make the purchase before we marry (date TBA) to avoid stamp duty, we’re looking at getting a buy to let mortgage on a place that we’d like to live in further down the line. At the end of the initial buy-to-let mortgage term, we’ll switch it to a residential mortgage and move in. I’d then rent out the flat where we currently live. This could have the added advantage of buying a property soon, at a time where the prices seem to be rocketing.

    Is this a feasible plan if my fianc!e can get a buy to let mortgage on her own (she earns around £43,000 and we have a deposit of around £50,000)? Is it easy enough to switch mortgages from buy-to-let, to residential at the end of the mortgage term? Are there any flaws in our masterplan?

    Any help or advice would be much appreciated,

    Thanks,
    Originally posted by andy230uk
    Flaws? well aside from the tax evasion, are you in anyway qualified to be a landlord? - or specifically is she?
    • andy230uk
    • By andy230uk 15th Sep 17, 12:11 PM
    • 3 Posts
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    andy230uk
    • #3
    • 15th Sep 17, 12:11 PM
    • #3
    • 15th Sep 17, 12:11 PM
    Flaws? well aside from the tax evasion, are you in anyway qualified to be a landlord? - or specifically is she?
    Originally posted by Guest101
    Well that's what I'm asking really. A solicitor has told me it's legal. If I can work around the governments restrictions in a legal way to save £7.5k I will. This is a money saving forum after all.

    It would have to be done before we marry because afterwards we count as one 'entity' and would be liable for stamp duty either way.

    Is anyone qualified to be a landlord?
    Last edited by andy230uk; 15-09-2017 at 12:15 PM.
    • Guest101
    • By Guest101 15th Sep 17, 12:21 PM
    • 15,128 Posts
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    Guest101
    • #4
    • 15th Sep 17, 12:21 PM
    • #4
    • 15th Sep 17, 12:21 PM
    Well that's what I'm asking really. A solicitor has told me it's legal. If I can work around the governments restrictions in a legal way to save £7.5k I will. This is a money saving forum after all.

    It would have to be done before we marry because afterwards we count as one 'entity' and would be liable for stamp duty either way. - yes and all your property becomes joint...

    Is anyone qualified to be a landlord?
    Originally posted by andy230uk


    Yes, I can name several on this forum. They are experienced and knowledgeable and fair. They did the research and provide good service for their tenants.


    Have you done any research?


    If I was to say a 'section 21 notice', any ideas? 'Protecting deposit? Gas Safety? Right to rent?'
    • andy230uk
    • By andy230uk 15th Sep 17, 12:28 PM
    • 3 Posts
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    andy230uk
    • #5
    • 15th Sep 17, 12:28 PM
    • #5
    • 15th Sep 17, 12:28 PM
    Yes, I can name several on this forum. They are experienced and knowledgeable and fair. They did the research and provide good service for their tenants.


    Have you done any research?


    If I was to say a 'section 21 notice', any ideas? 'Protecting deposit? Gas Safety? Right to rent?'
    Originally posted by Guest101
    Some prickly responses here Guest101, cheer up.

    I haven't done in depth research into being a landlord yet as I was looking to find out if this was a feasible plan before doing so.

    I hadn't considered that all property become joint after marrying and didn't think that was the system so will research this further. Thanks
    • Guest101
    • By Guest101 15th Sep 17, 12:32 PM
    • 15,128 Posts
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    Guest101
    • #6
    • 15th Sep 17, 12:32 PM
    • #6
    • 15th Sep 17, 12:32 PM
    Some prickly responses here Guest101, cheer up. - I'm not having a go, just trying to express the seriousness of your idea. Too many people become landlords off the cuff and then come on here complaining or worse, being sued.

    I haven't done in depth research into being a landlord yet as I was looking to find out if this was a feasible plan before doing so. - Even if it is financially, you may find it's not practically. There's tax implications, 40% given your wife's income! There's legal implications, which include criminal offences in the extreme. There's battling emotional attachment, you're buying your 'forever home' but it will be the tenants home and you'll have to keep your emotions in check.

    I hadn't considered that all property become joint after marrying and didn't think that was the system so will research this further. Thanks
    Originally posted by andy230uk


    Yes more research on all fronts!
    • Pixie5740
    • By Pixie5740 15th Sep 17, 12:38 PM
    • 11,089 Posts
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    Pixie5740
    • #7
    • 15th Sep 17, 12:38 PM
    • #7
    • 15th Sep 17, 12:38 PM
    It's not just avoiding being named on the mortgage or the deeds but you cannot have a beneficial interest in the property of £40k or more or the higher rate of SDLT will apply.

    Your fianc!e will be limited to a very small pool of lenders who will accept a gifted deposit coming from someone living in the property but not named on the mortgage. That's before you even get into her getting a BTL mortgage without already owning her home and with only a 20% deposit.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • AdrianC
    • By AdrianC 15th Sep 17, 12:44 PM
    • 15,429 Posts
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    AdrianC
    • #8
    • 15th Sep 17, 12:44 PM
    • #8
    • 15th Sep 17, 12:44 PM
    I own a flat
    Originally posted by andy230uk
    You own it 100%? Mortgage or not is irrelevant - you are the sole owner?

    I’d like to keep hold of the flat and rent it out, and have calculated I can afford to do this.
    Have you calculated if it's actually sufficiently profitable for the work? How much contingency have you built in? Will the mortgage be 125%+ covered by the rent?

    The issue is that we do not want to incur the extra 3% rate of stamp duty on a second home
    No, I'm sure you don't...

    The only solution I can see to the stamp duty issue is to avoid a joint mortgage and for my fianc!e to buy the second property on her own. I understand this would have to be done before we marry.
    If she is not an owner of the existing property, and you are not an owner of the additional one, and you are not a married couple, then she would not incur the 3%.

    I like to think it would be a ‘joint’ purchase for all intents and purposes with me sending her my half of the deposit and mortgage repayments. I appreciate the big downside here is that this is less legally sound than a joint mortgage and have had discussions with a solicitor about how to ensure both parties are protected.
    That sounds an awful lot like a tax evasion scheme...

    Either that or a regular gift to her. You're a very kind man. What happens if you split up? She owns the let property 100%, while she may have a claim on the property you've both been living in - especially after you marry.

    we’re looking at getting a buy to let mortgage... we’ll switch it to a residential mortgage
    No, SHE is looking, and SHE would be switching. You will not be involved. Your finances will not be taken account of, because you are not an owner.

    Is this a feasible plan if my fianc!e can get a buy to let mortgage on her own
    Given that she does not currently own a property, that alone may rule her out of a BtL mortgage.
    • Cornucopia
    • By Cornucopia 15th Sep 17, 12:44 PM
    • 9,402 Posts
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    Cornucopia
    • #9
    • 15th Sep 17, 12:44 PM
    • #9
    • 15th Sep 17, 12:44 PM
    Assuming that you own the existing property in your sole name, then the plan looks feasible to me - certainly beyond the level where you could ask a professional without looking silly. A specialist broker may be required to address AdrianC's point about your OH not being a homeowner at the point of the BTL application.

    Don't worry about Guest101's comments re: becoming a Landlord. Those are part of a generally grumpy attitude to LLs that persists amongst some FMs. Done in good faith, with respect to tenants and with knowledge of the (extensive) scope of the rules, it's well within the capabilities of the average person.

    If there is an issue with the plan, it's likely to be the requirement to pay 40% Income Tax on the rental profit (including the additional amounts now required on account of the reduced entitlement to tax relief on mortgage payments).

    There should be no issue in reverting the BTL mortgage to residential as long it's consistent with the terms of both mortgages.
    Last edited by Cornucopia; 15-09-2017 at 12:47 PM.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

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    • laidbackgjr
    • By laidbackgjr 15th Sep 17, 12:52 PM
    • 444 Posts
    • 1,135 Thanks
    laidbackgjr
    I can understand people being annoyed at having to pay the extra Stamp Duty - but can also understand why the Government introduced.

    Whilst many have already commented on some of the crazyness of your plan - also consider the total tax position of the various plans.

    Opt 1 - keep your flat and buy jointly in 3 years time = pay extra Stamp Duty on the purchase - then income tax and CGT on the BTL
    Opt 2 - sell your flat and buy jointly in 3 years time - invest the gain from your flat in ISA's and Pensions - no extra tax paid in fact the government will give you tax back on the investment into pensions.
    Opt 3 - keep your flat - partner buys a BTL = income tax and CGT to pay now - this may mean more tax is paid than under Opt 1!

    So possibly by trying to avoid paying extra stamp duty you may actually end up paying more tax!

    Unless you have a real desire to be a landlord - I'd be looking at option 2 as the one that makes most financial sense.
    • AdrianC
    • By AdrianC 15th Sep 17, 12:59 PM
    • 15,429 Posts
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    AdrianC
    Opt 1 - keep your flat and buy jointly in 3 years time = pay extra Stamp Duty on the purchase - then income tax and CGT on the BTL
    ...
    Opt 3 - keep your flat - partner buys a BTL = income tax and CGT to pay now - this may mean more tax is paid than under Opt 1!

    So possibly by trying to avoid paying extra stamp duty you may actually end up paying more tax!
    Originally posted by laidbackgjr
    Well, yes, but only because of more income/capital growth... You'd still have more money in your pocket.
    • PField
    • By PField 15th Sep 17, 1:01 PM
    • 88 Posts
    • 64 Thanks
    PField
    The additional stamp duty may be scrapped in 2-3 years. So I would just stick with original plan. If it's not, then 3% is small percentage in the big scheme of things- just put up with it and same yourself worry and headaches.
    • Guest101
    • By Guest101 15th Sep 17, 1:07 PM
    • 15,128 Posts
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    Guest101
    Assuming that you own the existing property in your sole name, then the plan looks feasible to me - certainly beyond the level where you could ask a professional without looking silly. A specialist broker may be required to address AdrianC's point about your OH not being a homeowner at the point of the BTL application.

    Don't worry about Guest101's comments re: becoming a Landlord. Those are part of a generally grumpy attitude to LLs that persists amongst some FMs. - Huh? I'm not anti landlord in the slightest. I'm simply talking about some of the very basic things and giving fair warning. Done in good faith, with respect to tenants and with knowledge of the (extensive) scope of the rules, it's well within the capabilities of the average person. - of course it is, the point is the OP hasn't done any research at all. It's no different to me considering performing open heart surgery, I mean I know nothing about it, but hey why not.

    If there is an issue with the plan, it's likely to be the requirement to pay 40% Income Tax on the rental profit (including the additional amounts now required on account of the reduced entitlement to tax relief on mortgage payments). - Hmm that was one of my comments?

    There should be no issue in reverting the BTL mortgage to residential as long it's consistent with the terms of both mortgages.
    Originally posted by Cornucopia


    Anyway I'm not looking to argue
    • Cornucopia
    • By Cornucopia 15th Sep 17, 1:13 PM
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    Cornucopia
    I'm simply talking about some of the very basic things and giving fair warning.
    Originally posted by Guest101
    You did kind of presume that the OP (or rather, his OH) had no experience, though. More generally, I'm not sure that going around giving other FMs "fair warning" about things is going to win friends and influence people.

    of course it is, the point is the OP hasn't done any research at all. It's no different to me considering performing open heart surgery, I mean I know nothing about it, but hey why not.
    It's really not anything like Heart Surgery. For a start, that is a life-and-death situation and requires years of training and recognised qualification. You may hold the (valid) view that being a LL should require similar strictures, but we are dealing with the situation in the here and now, where it doesn't.
    I'm a Board Guide on the Phones & TV, Techie Stuff, In My Home,
    The Money Savers Arms and Food Shopping boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views (especially those on the UK TV Licence) are mine and not the official line of moneysavingexpert.com.

    Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com
    • Guest101
    • By Guest101 15th Sep 17, 1:18 PM
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    Guest101
    You did kind of presume that the OP (or rather, his OH) had no experience, though. - because there was no mention of it? "I'm thinking of starting a mechanics workshop" - question one should always be, well are you a mechanic. More generally, I'm not sure that going around giving other FMs "fair warning" about things is going to win friends and influence people. - I'm not here to win friends, I'm simply saying that research is important. There are literally hundreds of threads of Landlords on this forum who are or have been sued by their tenants, or taken to court by HSE, Local Authority or even CPS. Again if I'm starting a business, I'd appreciate someone saying - oh btw there's serious legal implications, so you should do your research



    It's really not anything like Heart Surgery. - how do you know I'm not a surgeon, you've assumed it.... For a start, that is a life-and-death situation and requires years of training and recognised qualification. - often giving an extreme example can help highlight the inadequacies faced You may hold the (valid) view that being a LL should require similar strictures, but we are dealing with the situation in the here and now, where it doesn't.
    Originally posted by Cornucopia
    No it doesn't, however the OP is still liable to a high degree, and the fact that those requirements don't exist is at least partially why so many landlords end up losing out.
    • dirtycredit
    • By dirtycredit 15th Sep 17, 1:19 PM
    • 142 Posts
    • 237 Thanks
    dirtycredit
    are you in anyway qualified to be a landlord
    Yes, I can name several on this forum. They are experienced and knowledgeable and fair. They did the research and provide good service for their tenants.
    Even these experienced landlords were new landlords once. Get a grip!
    • G_M
    • By G_M 15th Sep 17, 1:25 PM
    • 41,873 Posts
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    G_M
    Hey Guest101. Careful! Or I'll be welcoming you to the Two Infractions Club soon.....!
    • Guest101
    • By Guest101 15th Sep 17, 1:26 PM
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    Guest101
    Even these experienced landlords were new landlords once. Get a grip!
    Originally posted by dirtycredit


    Indeed they were, and if they posted as new or potential landlords now, I would ask them "Do you know anything about this?"


    You don't have to be a Landlord to know what is required.


    (here's a hint, I'm not a landlord, but I'm more qualified than most who post on here having 'accidentally' signed a tenancy, or 'unintentionally forgotten' to provide x, y or z - If you are considering starting a business, the first question should be, can I do this? Do I have the knowledge to make this work? and then, is it financially viable?)
    • Guest101
    • By Guest101 15th Sep 17, 1:27 PM
    • 15,128 Posts
    • 14,763 Thanks
    Guest101
    Hey Guest101. Careful! Or I'll be welcoming you to the Two Infractions Club soon.....!
    Originally posted by G_M
    haha, I'm on 3 I think! Whoops....


    (I've not had lunch yet, and am clearly getting grumpy!)
    • SeduLOUs
    • By SeduLOUs 15th Sep 17, 1:27 PM
    • 2,091 Posts
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    SeduLOUs
    I'm a tenant of an accidental landlord - no protected deposit, no gas safety checks ever (been here 7 years), house has been sold within the landlord's family and I have a new landlord but no formal notifications given.

    I'm going to be giving notice in a few weeks time and still haven't quite decided how to play it. For now my thinking is that if the deposit is returned in full and immediately then I'll just walk away, but any talk of need for professional cleaning and the landlord is going to be in for a very, very nasty shock.
    Last edited by SeduLOUs; 15-09-2017 at 1:31 PM.
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