Additional 3% SDLT for parents not on title deed?

aroominyork

Some kind of loan is starting to sound like the way to go. Re affordability, we’ve done our sums. She can afford the extra repayments (she saves ridiculous amounts each month and is about to get a pay rise). From our side, we do not need the income but have agreed to approach it as a buy to let-type investment that also helps her out. We gave her £50k towards her current flat and put the same aside for when her brother buys his first place, and since we would do the same again if gifting, a £50k gift essentially becomes £200k.

rtho782

aroominyork wrote: »

Some kind of loan is starting to sound like the way to go. Re affordability, we’ve done our sums. She can afford the extra repayments (she saves ridiculous amounts each month and is about to get a pay rise). From our side, we do not need the income but have agreed to approach it as a buy to let-type investment that also helps her out. We gave her £50k towards her current flat and put the same aside for when her brother buys his first place, and since we would do the same again if gifting, a £50k gift essentially becomes £200k.

Except that as soon as you lend her £50k she won't get a mortgage.

The only way she will get the mortgage she needs is if you gift her the money without reservation. You will be required to sign to agree to this before she can even exchange.

In Summary:

Option 1: Gift her the money, she buys house, doesn't pay extra stamp duty, you get nothing back, you can't enforce any debt as she has signed document from you that it is a gift.

Option 2: Loan her the money for repayment when she sells and/or regular repayments, setting up a deed of trust. She either won't get a mortgage or the lender will reduce their maximum loan by 50k, so she can't by the house.

Option 3: You become part owners and charge rent as well as benefit from capital gains, she probably still won't get a mortgage, but even if she does, will have to pay £15k stamp duty.

None of these are viable for you so the plan is a non-starter.

martindow

Is there really such a difference between a £450k and a £500k house in your area? If your daughter limited herself to the lower figure you would avoid all of these complications.

getmore4less

aroominyork wrote: »

Some kind of loan is starting to sound like the way to go. Re affordability, we’ve done our sums. She can afford the extra repayments (she saves ridiculous amounts each month and is about to get a pay rise). From our side, we do not need the income but have agreed to approach it as a buy to let-type investment that also helps her out. We gave her £50k towards her current flat and put the same aside for when her brother buys his first place, and since we would do the same again if gifting, a £50k gift essentially becomes £200k.

The only places that will do require another £50k, you will be in for £100k

The situation is that our daughter can raise £450k towards a £500k property.

Where has the last £50k you gave her gone?

With that £50k and all these savings she is making why is it just your new money and the mortgage?

aroominyork

rtho782 wrote: »

She either won't get a mortgage or the lender will reduce their maximum loan by 50k, so she can't by the house

Looking at mortgage calculators, for some lenders the amount they will lend is not reduced when we add her 'repayments/rent' to committed outgoings. Would the principle of our loan to her - rather than the amount of the repayments - make all lenders reduce their offer by £50k?

Re getmore4less's question of what happened to the first £50k, that would be part of her deposit. £100k deposit + £350k mortgage.

teddysmum

What if she loses her job, has lower income and can't honour paying back the 'gift' ?


Very few jobs are watertight guaranteed nowadays, including those in professions.

aroominyork

teddysmum wrote: »

What if she loses her job, has lower income and can't honour paying back the 'gift' ?

Then it would be an advance on her inheritance when we depart this mortal coil. It is a risk we can probably afford to take.

On another issue, it's starting to look like a loan works better than a share of ownership. Can someone please explain the difference between a second charge on a title, and protection through a deed of trust which lays out plans for repayment?

Thrugelmir

aroominyork wrote: »

Can someone please explain the difference between a second charge on a mortgage, and protection through a deed of trust which lays out plans for repayment?

With a charge your permission will be required before the property can be sold. A DOT means that you might have to revert to taking court action.

A mortgage lender is going to grant you a second charge. As it'll block their ability to sell the property if they so wished.

Can only repeat that mortgage lenders aren't going to accept a loan. While you can privately draw up a DOT it will be worth little more than a piece of paper.

aroominyork

Thrugelmir wrote: »

Can only repeat that mortgage lenders aren't going to accept a loan. While you can privately draw up a DOT it will be worth little more than a piece of paper.

Can you explain why they won't accept a loan if a) it is a private agreement which doesn't affect the mortgage company's ability to sell the property, and b) taking into account the rent/interest, she remains within an acceptable level of committed costs to support the size of the loan? How is it different from lending her money to buy a car?

Thrugelmir

aroominyork wrote: »

Can you explain why they won't accept a loan

In the main it's lending policy set at board level. To avoid complications arising under the Insolvency Act for example. Mortgage lending is conducted at a macro rather than a micro level. Lenders therefore mitigate risk per se.