Stamp duty gift from seller (family sale)

AP7500

Newbie here seeking advise following conflicting message from solicitor

I am already a home owner and I am purchasing from my mother her only property in which she currently resides. Post-sale she will be moving into my family home and I will renovate and then rent out her old house.

The house has been valued by the lender at £330,000 I am obtaining a BTL mortgage for approx £225,000. The purchase price will be at full value for £330,000. The £105,000 difference will be gifted to me by way of equity in this family-sale transaction (so no cash deposit required). My mother's current mortgage is approx £41k above which she will retain the rest of the sales proceeds.

The stamp duty I am due to pay has been calculated by the solicitors as £14,000 based on the full purchase price. I cannot afford to pay the stamp duty on completion unless i Liquidate current savings. My mother is fine to gift me £14k however. Therefore the solicitor has suggested that my mother can gift me the stamp duty on completion whereby my solicitor will retain from the funds release £14k and release to my mother the sales proceeds £225k less the £14k gift = £211k. My mother has agreed and signed an additional gift form. My mother's solicitor has agreed and signed off with my mother from a legal perspective.

But having read a few stories online (albeit with vendor gifted deposits) I am unsure if on completion my lender will agree? I am worried that my solicitor has done all this without checking with the lender. Solicitor says he will check with the lender when he submits the completion documents. I asked him why he had not checked this prior to doing all this work. He says it should be fine.

Wanted to hear peoples thoughts since if the lender does not agree I need to sell some bonds which will take several working days for me to arrange. Do lenders allow this in family sales? I cant quite get my head around if this counts as buyer's incentive since it is a family sale where the "incentive" is a confirmed gift in legal writing.

Thank to all.

amnblog

Two things here.


You need the right Lender for this situation, with one, the gift is not an issue.


Your Solicitors need to recheck their SDLT maths.

TrickyDicky101

The solicitor has calculated the SDLT due incorrectly - it is on the consideration which is only £225k.

getmore4less

[STRIKE]giving equity up in their own home is consideration, it is not just the cash element for SDLT

(still wrong on £330k, now less SDLT that should be paid as it is a gift)[/STRIKE]


edit : misread the OP as giving up equity in the own home not that it was just a gift from the mother.

TrickyDicky101

getmore4less wrote: »

giving equity up in their own home is consideration, it is not just the cash element for SDLT

(still wrong on £330k, now less SDLT that should be paid as it is a gift)

No, it isn't.

Edit: I suspect my interpretation of what you said versus your intention in what you stated are different so maybe it would help (well, assist me anyway) if you could explain exactly what you meant by the bolded comment?

AP7500

I gave up on arguing the SDLT amount at the beginning of the transaction. In this regard the general consensus has been that SDLT should be charged on the consideration which in this case is deemed to be the "money changing hands" which is £225k. When I put this to my solicitor, they said the lender demands SDLT as per the purchase price which is £330k. I argued the SDLT amount is of no benefit to the lender. The solicitor argued that while this is true, if SDLT is calculated based on the consideration then this would fall as a 100% mortgage which would breach their product terms. In conclusion I accepted this due to the need for me to exhaust my mother of the property as soon as possible. I've been told that I could potentially claim a refund later on by liaising with HMRC. although I suspect that they will argue that the solicitor and lender signed off so that is that.

Regarding the Gift, my lender has already issued me the mortgage offer and has agreed to the transaction i.e. agreed to an inter-family sale and agreed for the equity to be gifted and serve as the deposit. I am at the end of the conveyancing process and waiting for solicitor/lender to agree completion.

However i'm worried that the solicitor will now confuse the lender with the request that a further gift is taking place. Logistically what we want is for the lender to release the mortgage funds to my solicitor, who then retains the stamp duty amonut and then sends to my mother's solicitor the net proceeds. We have also completed a legal gift form in this regard. However im concerned the solicitor hasnt thought this through - i.e. he has assumed the lender will be ok. My research shows that lenders arent keen on stamp duty gifts as some see it as an incentive i.e. an intended deviation of the sale price. However Im wondering that in this regard (given mother-son sale) that it would be ok, given the fact that the basis of this transaction is for equity to be gifted.

Many thanks again.

TrickyDicky101

Presumably that's why amnblog suggested you need a lender for whom the concessionary purchase is not an issue (ie so they get that SDLT simply isn't due on the gifted equity). It is irrelevant that a solicitor/lender 'signs off' on the SDLT - they don't make the rules!

Paying c. £5k in unnecessary SDLT is quite a hit...

AnotherJoe

Thats rubbish, it wouldn't be a 100% mortgage, it would be 225/330 (or whatever they valued it at), around 70%.
If your solicitor is correct that this lender regards it as a 100% mortgage, you need a different lender that accepts gifted equity as the deposit.

AP7500

The lender's valuation came to £330k which is pretty much accurate. They then agreed to the concessionary purchase where the difference between loan and valuation will serve as gifted equity. My mortgage offer terms I believe are based on a max LTV of 70% and a minimum valuation of ~£325k. Therefore the lend amonut and valuation amount fits this criteria.

The mortgage offer from the lender is ~£225k and the solicitor rejected my request that the purchase price = mortgage amount. He said to satisfy true LTV calculation for the lender, the purchase price needs to = valuation, and therefore the SDLT will be calculated based on the purcahse price of £330k.

Pretty ridiculous as the equity will always be there regardless of what the purchase price is listed as. True LTV is 68% no matter what since the valuation is 330k and the loan is 225k. Its shambolic.

If all goes through as is, can I submit a claim for a refund to HMRC? Or will they say whats done is done.

TrickyDicky101

AP7500 wrote: »

The lender's valuation came to £330k which is pretty much accurate. They then agreed to the concessionary purchase where the difference between loan and valuation will serve as gifted equity. My mortgage offer terms I believe are based on a max LTV of 70% and a minimum valuation of ~£325k. Therefore the lend amonut and valuation amount fits this criteria.

The mortgage offer from the lender is ~£225k and the solicitor rejected my request that the purchase price = mortgage amount. He said to satisfy true LTV calculation for the lender, the purchase price needs to = valuation, and therefore the SDLT will be calculated based on the purcahse price of £330k.

Time to get another solicitor then as this one can't read (the HMRC guidance easily available on the web)...

getmore4less

TrickyDicky101 wrote: »

No, it isn't.

Edit: I suspect my interpretation of what you said versus your intention in what you stated are different so maybe it would help (well, assist me anyway) if you could explain exactly what you meant by the bolded comment?

OK I read it wrong, I read that the OP was giving up equity in their own home.