Stamp Duty confusion...

holly_hobby

The property is not being gifted or inherited so SDLT re those instances is irrelevant to this case.

The transaction will go through LR - at a 165k pch price - full stop !

That means SDLT will be 1% of 165k - and no other figure.

For mge app purposes, the pch price is still 165k, but with regards to the deposit reqd by the lender, the Vendor is effectively selling as family connected under value/preferred pch, and in essence essentially gifting away (forfeiting) a sum equal to 25k deposit (family under value has the same uw procdures as a family monetary gifted deposit ) - resulting in the purchaser only having a mge requirement of 140k on 165k - but in either case importantly the effective pch price remains 165k.

This only works where it is direct family - as Vendor deposits (undervalue or monetary) are no longer permitted, with Builders deposits capped at 5%.

Hope this helps

Holly

tarkytarks

We bought our house from my OHs parents at the start of the year, with a gifted portion of the value (so we got a mortgage for in this example £140k). I just checked and we paid SD on the total sale price not the amount we had the mortgage for.
The gifted part was just seen by the bank as our deposit, i.e. in the same way as you presenting them with £25k that you have saved up.

holly_hobby

Yes, thats correct Tarky you will have done.

Holly x

Richard_Webster

Oh what confusion between lender requirements and SDLT rules!

If the lender is happy that whilst the property is worth £165K, but because of the family connection OP is only paying £140K for it then you only have to pay SDLT on the actual/real price of £140K. That is what OP should be asking lender to consider rather than getting all tied up in stuff about gifted deposits etc.

(Bottom line from lender's point of view should be what they could sell for if borrower defaulted therefore value is more important than actual price, provided lender is happy with value. I know, lenders aren't always very logical about these things....)

If the lender can't understand how a father might sell a property more cheaply to his son and requires some arrangement whereby the price is actually £165K in the contract and Transfer deed and:

a) is aware of the artificiality here then you pay SDLT on £165K; but
b) if lender not aware you still pay on £165K but it is mortgage fraud.

holly_hobby

And the sale price with LR is recorded at 140k ?

And moreover in respect of Tarky, the conveyencer in their case, has got it wrong and apparently overpaid HMRC re SDLT in respect of their pch ?

Thanks for any clarification

H

tarkytarks

Richard_Webster wrote: »

Oh what confusion between lender requirements and SDLT rules!

If the lender is happy that whilst the property is worth £165K, but because of the family connection OP is only paying £140K for it then you only have to pay SDLT on the actual/real price of £140K. That is what OP should be asking lender to consider rather than getting all tied up in stuff about gifted deposits etc.

(Bottom line from lender's point of view should be what they could sell for if borrower defaulted therefore value is more important than actual price, provided lender is happy with value. I know, lenders aren't always very logical about these things....)

If the lender can't understand how a father might sell a property more cheaply to his son and requires some arrangement whereby the price is actually £165K in the contract and Transfer deed and:

a) is aware of the artificiality here then you pay SDLT on £165K; but
b) if lender not aware you still pay on £165K but it is mortgage fraud.

But if the buyer has no physical deposit, they have to use the higher price to be able to get a mortgage from the bank. The difference between the higher price and the price they are getting the mortgage for is acting as their deposit to the bank. Therefore SD at the full selling price not the mortgage amount.
Unless the bank will give them a 100% mortgage for £140k of course.

ddavis

Right, sorry for delay. Glad to see there is no general consensus here either

Mortgage offer states it's an "undervalue" but puts the Purchase price as £165k and the mortgage as £140k. There is no outstanding mortgage on the property. Market value is, according to valuation survey, £165k.

The last person at HMRC that I spoke to said that the "chargeable consideration" would be the mortgage amount because the difference never actually changes hands. That said, they've also told me that I pay it on £165k.

What I find most interesting is I could entirely avoid stamp duty by getting my dad to gift me the house for nothing, then mortgaging it and giving him £140k. What a crazy system.

ddavis

Richard_Webster wrote: »

Oh what confusion between lender requirements and SDLT rules!

If the lender is happy that whilst the property is worth £165K, but because of the family connection OP is only paying £140K for it then you only have to pay SDLT on the actual/real price of £140K. That is what OP should be asking lender to consider rather than getting all tied up in stuff about gifted deposits etc.

(Bottom line from lender's point of view should be what they could sell for if borrower defaulted therefore value is more important than actual price, provided lender is happy with value. I know, lenders aren't always very logical about these things....)

If the lender can't understand how a father might sell a property more cheaply to his son and requires some arrangement whereby the price is actually £165K in the contract and Transfer deed and:

a) is aware of the artificiality here then you pay SDLT on £165K; but
b) if lender not aware you still pay on £165K but it is mortgage fraud.

Lender is well aware that the £25k difference is a gifted deposit by way of equity transfer. That's why I went with Santander, most other banks would only allow 5% deposit to be through that route.

SuzieSue

ddavis wrote: »

What I find most interesting is I could entirely avoid stamp duty by getting my dad to gift me the house for nothing, then mortgaging it and giving him £140k. What a crazy system.

It isn't really, because if your father gifted it to you, then there would be nothing to stop you just keeping the property and not giving him anything for it.

ddavis

SuzieSue wrote: »

It isn't really, because if your father gifted it to you, then there would be nothing to stop you just keeping the property and not giving him anything for it.

No, but if I did give him something for it then we'd be in exactly the same position as we are now but I won't have paid a penny in SD.

I wonder how many people do that instead...