Additional 3% SDLT for parents not on title deed?

booksurr

aroominyork wrote: »

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?

it is not that they will not accept. They will "simply" factor into their affordability calculation that the daughter has a 100k deposit and needs a loan of 400k, of which the lender is being asked to provide 350k with the remaining 50k coming from elsewhere.

each lender will have their own attitude as to whether they will accept a LTV of 400/500. Your daughter will not know until she asks for actual quotes, at which point you will be asked to confirm in writing if you wish to lie or not regarding loan or "gift"? What you tell the lender may never be put to the test if daughter agrees privately with you to repay "the gift", although of course if she gets divorced or repossessed "your" 50k may disappear in a puff of smoke once the legalities of what is what are put to the test .

aroominyork

I was using rounded figures: the actual LTV is likely to be c.73%: £525k offer made today; £90 deposit; £50k from us; £385k mortgage. They have no (other) loans to repay, their bank statements show them living well within their means, and they have just had pay rises increasing their combined salaries about 20%. So if the online mortgage calculator tool shows them still 'eligible' for £385k after taking into accounts their payments to us, is there any reason to lie?

Though I see, booksurr, you are calculating our loan as part of the LTV. Is that so - it's the % she is loaned even if the loan does not come from the mortgage provider? Wiki suggests that would be a combined LTV. https://en.wikipedia.org/wiki/Loan-to-value_ratio and that regular LTV is "the ratio of the first mortgage line".

booksurr

aroominyork wrote: »

Though I see, booksurr, you are calculating our loan as part of the LTV. Is that so - it's the % she is loaned even if the loan does not come from the mortgage provider? Wiki suggests that would be a combined LTV. https://en.wikipedia.org/wiki/Loan-to-value_ratio and that regular LTV is "the ratio of the first mortgage line".

i am not going to spend time micro analysing what you write

a lenders affordability calculation looks at total income less total expenditure, That also takes account of how much debts they have.

You imply that the 500k purchase will be 100k deposit, + 350k mortgage + 50k "loan" from you. Daughter is therefore assessed as having 400k debt, whether that is applied in full as a LTV ratio is down to the lender's criteria - go and ask them. It will however impact how much she can borrow from the vast majority (but not all) of lenders.

AnotherJoe

rtho782 wrote: »

Except that as soon as you lend her £50k she won't get a mortgage.
This is incorrect. See below.

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.
Again, same comment, incorrect.

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.
Incorrect, see below.

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.
Agreed, terrible idea.

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

Nope, it is doable, and the reason its doable is that the OP (not Rtho782) has changed their position 180 degrees.

Initially they said "We can invest the other £50k if we receive an income from it. So we are looking for a way to receive income on our share of the property" Now they say "From our side, we do not need the income" (my emphasis in bold)These are very different positions !!!

What the OP can do if no income is required, is give it as a loan that does not need to be repaid until the house is sold or remortgaged. This will not affect the size of mortgage given to daughter, indeed it will help with LTV and get her a better rate.

You can have conditions on this loan such as, the amount is returned including any change in house prices. You can have a second charge upon the property in case of extreme events such as a falling out. You can also amend your will to account for other siblings in event its never repaid.

How do i know all this? Been there, done that. Not all lenders will allow such a loan, I know that Nationwide and Santander will (or at least did as of 2016 and 2014 respectively).

rtho782

I'm not the OP :P

OP has already mentioned that if she were for example, to lose her job, this would become an advance against her future inheritance.

Perhaps in that case it makes sense to just gift it, and adjust the will to allocate her brother 50k before the residuary estate is split 50/50.

AnotherJoe

rtho782 wrote: »

I'm not the OP :P

OP has already mentioned that if she were for example, to lose her job, this would become an advance against her future inheritance.

Perhaps in that case it makes sense to just gift it, and adjust the will to allocate her brother 50k before the residuary estate is split 50/50.

I do realise you arent the OP Rtho782

I guess the wording could be improved to make that clear, and I will.

sparky130a

Using your child as a profit vehicle. How edifying.

AnotherJoe

sparky130a wrote: »

Using your child as a profit vehicle. How edifying.

They arent using "the child" as a profit vehicle, its a joint venture. OP has given up a substantial sum of money they could use right now for whatever they want.

Perhaps that money will be needed by the OP in 30 years time for care home fees (not that its guaranteed accessible but it might be). Getting it back without inflation means a potential substantial loss. They could also invest it now and get back double that in 30 years time, indeed maybe they are cashing in investments to release it.

Also, there is another sibling. This might be a 30+ year loan. Taking account of HPI makes it fair otherwise one gets £50k now and the benefit of a nicer house and a bigger gain in money, whilst the other gets £50k in 30 years time when it buys a Mars bar.

sparky130a

AnotherJoe wrote: »

They arent using "the child" as a profit vehicle, its a joint venture. OP has given up a substantial sum of money they could use right now for whatever they want.

Perhaps that money will be needed by the OP in 30 years time for care home fees (not that its guaranteed accessible but it might be). Getting it back without inflation means a potential substantial loss. They could also invest it now and get back double that in 30 years time, indeed maybe they are cashing in investments to release it.

Also, there is another sibling. This might be a 30+ year loan. Taking account of HPI makes it fair otherwise one gets £50k now and the benefit of a nicer house and a bigger gain in money, whilst the other gets £50k in 30 years time when it buys a Mars bar.

Sorry, i simply don't see it that way.