Should I buy flat for cash or get a mortgage

MrHelpful

Hello,

I need some advice.

I have found a flat in an area I like and managed to agree an asking price (5k below advertised) which has been accepted. Now the next steps, should I buy the flat for cash or take out a mortgage. I would be a first time buyer but the flat is for 100k and I rather not use my " stamp duty free ticket" on this property. I am in the lucky position where I have 100k cash available.

Options I see as being available to me are:

1) Buy the flat for cash and clean out my bank account
2) Place a deposit and take out a mortgage. However can one take out a mortgage and not have the property in their name. I am thinking I'll place it in my parents so that I do not use my "stamp duty free ticket"
3) Could my parents take out a mortgage. They both do not work nor claim any benefits off the state. I do give them £500 per month to cover bills. I am more then happy to give them money for the deposit.

I work away mainly and therefore this flat is to be used as a weekend pad or possibly to rent out. What is the best way to save on taxes. Any advice much appreciated.

I need recommendations as I am earning !!!!!! all in the bank and stock market is pants, I have maxed out premium bonds and ISAs and feel I should get on the housing ladder rather then keep going on hols.

Many Thanks

DVardysShadow

Eh? If you buy it, then you have used up your stamp duty free ticket, mortgage or not.

Yorkie1

Re the choice between using all your savings and taking a mortgage, I would not risk having no rainy fund to cover the unforeseen events which can often occur with a house e.g. new boiler, roof problems, etc - or if you lost your job / couldn't earn for a while. The advice is to aim for 6 months' costs in savings.

I personally would retain some savings and put a large deposit down with a small mortgage. There's nothing to stop you overpaying, if your monthly income & the mortgage t&c permit, without further jeopardising your rainy day fund. However you will of course be paying interest on that mortgage so you'd need to weigh that into the equation.

I think it's selfish to suggest that your parents can seek to take out a mortgage and you pay them money to cover it. You have the funds yet you want them to take all the risks so that you can try to avoid / evade tax and they incur a liability. Also, I don't know enough about the legal issues which might arise - hopefully someone here will clarify and confirm or correct - but you'd need to check out
a) whether they incur LL responsibilities by the set-up
b) what happens if they get into financial difficulties for any reason and the house must be sold
c) what happens if you get into financial difficulties for any reason and can't repay them
d) what happens if you decide to let it out - it's their neck on the line if there are tenant issues.

In addition to what DVS says, how do you know that the Stamp Duty rules will remain in existence long enough for you to try to benefit from it second time round? The way things are apparently going with this government, anything like will be stopped so that the tax income can be upped.

lpp1980

I wouldn't buy a flat in your position. Theres lots of extra hassle involved with flats. Leases, maintenance charges, ground rents etc etc. Also think 5-10 years ahead when you might want to sell it. The market is saturated with flats.

If it were me, I'd go for a small freehold property. Take a small mortgage and overpay it while the rates are so low. You'd qualify for some pretty decent tracker rates with £100k.

bigbigmamamoo

you could look in to an offset mortgage. With this you have a savings account and a mortgage with the same bank and the savings account offsets the mortgage rather than earning interest. The more you have in the savings account the less interest you pay. If you have the full amount of the mortgage in the savings account you are paying no mortgage. If you do that you can still access the capital should you need it

Ankatden

Stamp duty limit is 125k and the free Stamp duty to FTBs is not going to last forever.

If you have the cash and no great use for it then not having a mortgage to pay is a good one as can always take a mortgage out later.

Alternatively if you wish to stay liquid then take a mortgage with offset maybe being best option.

theartfullodger

FFF lad, get real...


Get a mortgage and use the money for something useful...

Mistress/Toy-Boy/plural-of-both/new-car/boat/holiday/give-shedloads-2-charity/.. etc etc etc...

Stone me, G*d wouldn't have invented money if he(she?) didn't want us to use it...


Cheers!

Artful

twirlypinky

I really don't think stamp duty is so high that you need to start thinking of putting property in other people's names just to avoid paying it.

At some point you'd have to pay in heritance tax on it anyway.

If you've got that much cash to splash why are you buying a leasehold for £100k? Buy a nice freehold house with a small mortgage and have somewhere lovely to live without any added hassles.

You say you want to get on the house ladder, but at the moment it's more like a snake, i wouldn't put all my savings in something like a flat of that value. In a few years you'll want something bigger and need to sell it. If you really want to buy somewhere now, buy somewhere you're not going to have to sell for a long time - hopefully when the current house market wobbles are over.

Three years ago my bf bought a £100k leasehold property thinking he'd got on the ladder. Now we're £10k in negative equity - that was far from an investment.

MrHelpful

By saying I'll buy it was saying I'll put the money in parents account so that they can purchase on my behalf. I'm looking at rental yield of 5% which is 10 times better then money I'm the bank. I'm a high tax bracket worker. I have no issues with putting parents in lurch... My money is their money and vice versa. I've looked after them for the past 6 years. The owner is leaving the flat furnished and is near school, park and in village centre. I'm just thinking if we get a mortgage then I'll be paying the initial charge too for mortgage. I've had enough of the bank taking the Mick. The ground rent and lease is a pain agreed but I like the area so intense to keep for a while anyways.

I've got money for toys and hols therefore not all in one nest egg.

Jonbvn

MrHelpful wrote: »

By saying I'll buy it was saying I'll put the money in parents account so that they can purchase on my behalf. I'm looking at rental yield of 5% which is 10 times better then money I'm the bank. I'm a high tax bracket worker.

You do realise that the rental income is taxable? As such, it is generally a good idea to have a mortgage, so that you can offset mortgage interest against tax.

If you are only getting 0.5% interest from savings then you are not trying. If you lock it up in FR ISA for 5 years, you can get close to 5%, virtually risk free.

For a return of only 5%, IMPO a property investment just does not stack up given the time you have to spend on it.

poppysarah

Having no savings means you're more likely to get benefits if you lose your job. And having no mortgage means you can save up again. (which ok admitedly defeats the first bit once you get to 16k)


What are the long term costs of the flat though? Ongoing monthly charges? Maintenance when it needs a new roof?