STAMP Duty (Second Home)

Zacser

Looking to get your advice guys.

Situation: Currently live with my gf however the 1 bed flat is in my name. I am fortunate that the flat is worth around 400k with a mortgage of 130k. This was bought through a right to buy scheme so cant sell within 4 years without repaying the discount.
In addition, through a LOT LOT of hard work, I have managed to have savings/deposit of 50k and my gf has 15k (65 total) to contribute and consequently looking to buy to start a family. Due to the timeframe, we will definitely be hit by the new stamp duty as we cant close before Apr. We looking at houses 400-400k max so the stamp is ridiculous.

What would your advise be? is there a way around this stamp?
Also being a realist, have you been in similar unequal deposits where you have set up deed of trust incase something happens in the relationship?
Is there anyone who has faced such a huddle?

I appreciate my situation is very fortunate and grateful however always good to get some sound advice.

giddypenguin

Wouldn't your best option be to overpay your mortgage like crazy, and wait the 4 years until you can sell without having to repay your discount, then buy somewhere outright?

4 years really isn't that long to wait - even if you do want to start a family (baby can share your room quite easily until 1 year old). And that way you keep your discount, save money on interest (I assume you'd have 2 mortgages if you were to buy a second home) and 3% stamp duty - not to mention the stress of being a landlord and associated costs with that.

Zacser

Many thanks for your advice. Def this is something I have thought about and pondering heavily. The thing is I have always had the ambition of having a rental property for income and given the central prime location its in, this is a flat I wouldn't want to sell anytime soon. The rental income from it would be double the mortgage cost so would be self sufficient.

That said, with the low rates environment we in, it makes sense to pay off some.

Pixie5740

Get things into perspective. You might have to pay an extra 3% in SDLT because you were able to buy your current home with a whopping big discount and now want to put that property into the private rental sector.

marksoton

You're trying to have your :bdaycake: and eat it.

You've enjoyed the RTB discount so if you wish to retain it you'll need to suffer the 3% SDLT.

agrinnall

Zacser wrote: »

Also being a realist, have you been in similar unequal deposits where you have set up deed of trust incase something happens in the relationship?

As you've already been told the stamp duty is just something you'll have to pay as a result of your good fortune in using RTB.

If you are concerned enough about the future state of your relationship to consider such agreements are you sure you want to buy a £400K property together?

Zacser

I am simply being a realist as anything can happen in a relationship these days.

It does indeed seem like am having my cake and eating it however trust me when I say this has come with over a decade of strict financial discipline, sacrifices and simply being tight.

Appreciate the input.

mwpt

Zacser wrote: »

Many thanks for your advice. Def this is something I have thought about and pondering heavily. The thing is I have always had the ambition of having a rental property for income and given the central prime location its in, this is a flat I wouldn't want to sell anytime soon. The rental income from it would be double the mortgage cost so would be self sufficient.

That said, with the low rates environment we in, it makes sense to pay off some.

Your case may not exactly be typical because it involves a RTB property but in all other ways this is exactly what the 3% extra stamp duty is designed to do - deter everyone from just holding on to existing properties for renting out, instead of releasing them so that new entrants to the market can also have a chance to buy a home.

booksurr

mwpt wrote: »

Your case may not exactly be typical because it involves a RTB property but in all other ways this is exactly what the 3% extra stamp duty is designed to do - deter everyone from just holding on to existing properties for renting out, instead of releasing them so that new entrants to the market can also have a chance to buy a home.

I agree, the OP's case is exactly what the change in rules is aimed at and the RTB origin is irrelevant

OP has a choice, he can sell and repay RTB discount or he can hang on, not repay the discount, but end up as owner of 2 properties and so subject to 3% SDLT on the purchase of the second property. he certainly does want his cake and eat it.

he is therefore no different to anyone else choosing not to sell up when they buy their new property, be that a second home, or a new main residence whilst the old one is let. The choice is do it and pay 3%, or don't do it and don't pay 3% tax

as for unequal ownership I think it is crucially sensible to have a deed in writing covering all eventualities of a split and need to sell up. There are countless posts on here examining the difference between a deed based on simply getting back the deposit as a lump sum and then splitting the residual equity or converting the deposit to equity and proportionate ownership shares from the outset. Each has their merits in certain circumstances, it comes down to choice and using the search function to read up on them

Zacser

totally agree this is what SD is designed to do and its obvious I will have to pay if I chose to take that option.

That said, an argument can be made that its a very unthought-through tax (disregarding my RTB scenario). Another scenario I have just read is one where a parent helps their child get their first flat and as a result they are charged the extra 3% if they are on the mortgage.

Zacser

Appreciate your input and advice booksurr. Am glad you see the validity in one preparing for any eventuality regardless of how a situation is. Its simply a prudent measure especially when I have spent the whole of my twenties working multiple jobs and making numerous sacrifices unlike most twenty year old to get to this point.
If one choses to write down their goal and chase them, he/she shouldn't be accused with wanting to have./eat their cake.