Already have half the house want to buy the rest

Johnuala

Around six years ago me and my wife bought the upstairs flat from her mum on a 999 year lease. Some six years later my wifes mum has had to go into a home and to pay for that she has to sell her remaining freehold part of her house. We want to buy the rest of the house and through court of protection and my wifes siblings blessings, have agreed a price near 200 000. My existing mortgage is with lloyds, cheltnem and gloucster, so naturally i went to them. They have said i can only buy the property if i make it one property again, and have rather casually mentioned that i would also now have to pay stamp duty when the property is converted back to one again. Is this correct? If i go with another mortgage company can i keep it as two seperate properties? Will i have to pay stamp duty on the property as a whole on the value that it is now worth, or the combined amounts? Any help in these areas would be greatly received.

xylophone

In effect, you are buying another flat in the same building (plus the freehold) and so would have to pay stamp duty as you would if buying a property anywhere else?

Presumably they'll only permit you to borrow on the same terms/mortgage if the two flats become one home again on the basis that otherwise you'd have to take out a separate buy- to - let mortgage?
http://www.hmrc.gov.uk/budget2012/ootlar-rates.pdf SDLT rates Page B10

gazfocus

presumably, you'd have to pay stamp duty anyway as the price of the property is above the stamp duty threshold.

From what I can work out, your current lender has said that in order to buy the 2nd flat on a residential mortgage, you will need to make the two flats into one house. This is because you can't strictly live in two places at once.

As xylophone suggests though, you can go for a buy to let mortgage which will enable you to keep the two properties seperate.

LConveyancer

Most mortgage lenders won't lend on freehold flats (see the Council for Mortgage Lenders Handbook section 5.6.1b - C&G don't) so that might be why your lender has refused to lend, you have to be careful how you phrase things... in this instance you would buy the downstairs flat as leasehold along with the freehold title. The new mortgage would be registered against the leasehold title and you would pay stamp duty on the price you paid for the downstairs flat only.

What are your intentions for the future, are you looking to rent the downstairs flat out? In which case you would need a Buy to Let mortgage?

Johnuala

Thanks for your replies guys.
A few thoughts

The downstairs flat is being bought at well below the stamp duty value of 250. So i would imagine that i would pay stamp duty on the combination of the flat price along with the price i originally paid for the upstairs. Or is based on the valuation of the combined properties now?

We do plan to make a self contained flat in part of downstairs and use the rest ourselves. It would be to rent out and not to sell obviously. This does not mean that i would have to get a buy to let mortgage would it?

giddypenguin

£125k is the threshold (1%), not £250k (goes up to 3%) either way you'd have to pay.