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    • purchase741
    • By purchase741 11th Oct 17, 2:14 PM
    • 20Posts
    • 1Thanks
    purchase741
    Buy to let mortgage
    • #1
    • 11th Oct 17, 2:14 PM
    Buy to let mortgage 11th Oct 17 at 2:14 PM
    Hi,

    wondered if anyone can tell me if I'm liable for stamp duty in the following scenario.


    Currently homeowner in my own residential property which I purchased over 2 years ago.


    I also have another property which I bought jointly with my friend in 2007 for £85,000


    It is still in joint names however I'm currently going through the process of getting a remortgage (buy to let) in my own name to remove my friend from the mortgage.


    The house has been valued at £90,000 & the outstanding mortgage is £75,000 (mortgage is for £72,000 & I'm paying £3000 in capital to clear it.)


    As we bought the house in 2007 & paid stamp duty on it at the time does anyone know if I'm liable to have to pay stamp duty again even though I already own the property(or half of it as the case may be) I've read something about chargeable consideration which has confused me?


    Any help would be greatly appreciated.


    Many Thanks
Page 1
    • saajan_12
    • By saajan_12 11th Oct 17, 2:30 PM
    • 993 Posts
    • 671 Thanks
    saajan_12
    • #2
    • 11th Oct 17, 2:30 PM
    • #2
    • 11th Oct 17, 2:30 PM
    You pay stamp duty on the consideration you pay for your friend's share. This includes any cash you pay friend + money to pay off friend's 'share' of mortgage.
    • 00ec25
    • By 00ec25 11th Oct 17, 3:30 PM
    • 5,555 Posts
    • 4,937 Thanks
    00ec25
    • #3
    • 11th Oct 17, 3:30 PM
    • #3
    • 11th Oct 17, 3:30 PM
    you currently own the BTL "jointly". On that basis an o/s mortgage is always, by default, set at 50/50 so with 75k o/s you have 37.5k each

    I have no idea at all what the £3k relates to - please explain.
    Either the o/s mortgage is 75k or 72k.
    Is the 3k a payment to your friend for his share of the equity?

    the chargeable consideration is the money you pay friend for his equity plus half of the value of the o/s mortgage since friend is being removed from having any liability towards the mortgage. Assuming you are not paying anything towards the equity and thus merely have 37.5k of o/s mortgage, so the total chargeable consideration is 37,500.

    Note carefully - you are purchasing a further share in a property which is not your main residence, therefore the higher rate SDLT will apply. However, your chargeable consideration is only 37.5k and is therefore just under the 40k threshold applicable to the higher rate. On that basis, if those are the real figures, you will not have to pay any SDLT as the normal rate would then apply with its £125k 0% band

    so as you can see, if you are paying 3k to your friend for his share of the equity, plus paying off his liability on the mortgage you would be over the 40k threshold and would have to pay higher rate SDLT on £40,500

    see FAQ page 27 Q8 in the guide...
    https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-for-purchases-of-additional-residential-properties
    Q8.
    I own a main residence and also jointly own a buy-to-let with my brother. I’m planning to purchase my brother’s share, paying him some cash and taking on his share of the mortgage. Will the higher rates apply?
    A8.
    Yes, so long as you contribute £40,000 or more, the higher rates will apply to the total amount you give for your brother’s share, including any mortgage debt that you take on, as you already own another residential property and are not replacing your main residence.
    Last edited by 00ec25; 11-10-2017 at 3:37 PM.
    • purchase741
    • By purchase741 11th Oct 17, 4:14 PM
    • 20 Posts
    • 1 Thanks
    purchase741
    • #4
    • 11th Oct 17, 4:14 PM
    • #4
    • 11th Oct 17, 4:14 PM
    Thank you for your reply.


    Sorry to clear it up in more detail.


    The outstanding mortgage is with NRAM - (previously a together mortgage with a secured loan on top)


    so its currently £81,712
    with secured loan of £4,351


    Total £86,063


    My friend and I have an agreement to pay off just over 7k each in cash - so this will leave £72k owing - which is the agreement in principle I have from Kensington.


    Would this mean my chargeable consideration therefore is only £36,000??
    • saajan_12
    • By saajan_12 11th Oct 17, 4:28 PM
    • 993 Posts
    • 671 Thanks
    saajan_12
    • #5
    • 11th Oct 17, 4:28 PM
    • #5
    • 11th Oct 17, 4:28 PM
    Total £86,063

    My friend and I have an agreement to pay off just over 7k each in cash - so this will leave £72k owing - which is the agreement in principle I have from Kensington.

    Would this mean my chargeable consideration therefore is only £36,000??
    Originally posted by purchase741
    Will you pay friend anything for his share of equity? After paying down the mortgage, based on a £90k valuation there's 18k (or 9k each) equity.

    Also where did the 3k go?
    • purchase741
    • By purchase741 11th Oct 17, 5:42 PM
    • 20 Posts
    • 1 Thanks
    purchase741
    • #6
    • 11th Oct 17, 5:42 PM
    • #6
    • 11th Oct 17, 5:42 PM
    No it's a clean cut, long story but he needs to be off the deeds & I have put more capital into the house so the equity will be mine.

    Sorry I was confusing matters with the 3k, the figures are correct in my second post
    • 00ec25
    • By 00ec25 11th Oct 17, 6:06 PM
    • 5,555 Posts
    • 4,937 Thanks
    00ec25
    • #7
    • 11th Oct 17, 6:06 PM
    • #7
    • 11th Oct 17, 6:06 PM
    so its currently £81,712
    with secured loan of £4,351 = Total £86,063

    My friend and I have an agreement to pay off just over 7k each in cash - so this will leave £72k owing - which is the agreement in principle I have from Kensington.

    Would this mean my chargeable consideration therefore is only £36,000??
    Originally posted by purchase741
    lets start again...

    as i mentioned, mortgages are deemed to be 50/50, so your friend is currently "exposed" to a property debt of 81,712 /2 = 40,856

    it appears the secured loan is nothing to do with the sale & purchase of the share of the property. However, that loan obviously has to be cleared since it is a charge ("secured") against the property, but that clearance is not a payment towards you buying the property.

    It appears you and friend have a total debt of 86,063 but you and friend say you will pay off "just over 14k" from that total debt. So the secured loan will be cleared in full by a contribution of 4,351/2 = 2175 from each of you. That leaves "just over 14k" - 4,351 = "just over" 9,649 to be paid off the mortgage as 50/50, so patently 4,825 each

    the mortgage is 81,712 /2 = 40,856 each from which friend will pay off "just over" 4,825 from his share meaning you are "taking over" his residual liability of "just over" 36,031 so the higher rate SDLT is not payable, and as that is well within the standard rate bracket you will not have to pay any SDLT at all


    have you asked your solicitor to explain it to you yet?
    • purchase741
    • By purchase741 11th Oct 17, 8:14 PM
    • 20 Posts
    • 1 Thanks
    purchase741
    • #8
    • 11th Oct 17, 8:14 PM
    • #8
    • 11th Oct 17, 8:14 PM
    I did yes, however it is free legal included in my mortgage so when I raised it with them the explanation differed each time I asked, this is why I've posted on here!

    It was mentioned that there would be a stamp duty cost of just over £1200, which I worked out to be the 3% additional sdlt of my friends share of the mortgage aspect alone(the solicitors couldn't work that bit out)! Which I supposed made sense but they didnt seem to know the answer when I told them that I was paying a lump sum of cash down to reduce the debt!

    Really appreciate your explanation, makes a lot more sense to me now so thank you!
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