CGT on Declaration of Trust Apportionment

JamesEde

Hi everyone,

Long time browser of these forums and first time posting. Thanks in advance for any advice.

I am a first time buyer hoping to purchase next year. To boost my borrowing power I am looking to get a joint mortgage with a family member so that both of our incomes can be considered. We have verbally agreed that even though we will both be on the mortgage I will pay the whole payments. We are happy keeping this agreement verbal.

I am hoping to draw up a declaration of trust which shows that I own a 99% share and the family member owns 1%. My question is two-fold:

1. If we draw up a declaration of trust during the purchase of the property, is this going to look suspicious to the mortgage lender / will they care who owns how much of the property?

2. If we draw up a declaration of trust after the purchase of the property, are there any capital gains tax implications? We would be going from owning 50% each, to me owning 99%. My concern is that if I am seen to be acquiring equity in the property then one of us will be liable for tax on it.

Some other information which may be useful in case you need it:

- I am a first time buyer, the family member is not.
- The family member is my step-dad.
- We haven't found a property yet this is purely hypothetical.

Thanks so much for any help. These forums have been a life saver in the past!

kingstreet

A 'joint borrower, sole proprietor' solution might suit you better. If your step-father owns another property, JBSP will enable you to avoid the second property SDLT surcharge.

Would he accept owning none of the property and accepting all the risk for zero reward?

A broker would be the best place to establish the right route for this...

JamesEde

Thanks for the message kingstreet much appreciated.

Joint borrower, sole proprietor sounds exactly the sort of thing I would be looking for.

He is quite happy owning none of the property and that would be both of our preference. He's happy to take me at my word that I will cover the payments.

Is this type of mortgage fairly commonly given by lenders? Or is it something I can request to be done for any mortgage? I only have one years business accounts (I'm self employed) so I am limited as to which mortgages companies will accept me. The main option being Halifax.

JamesEde

I just checked out JBSP and it seems like only a few lenders are offering at the moment which may scupper me if I only have 1 years accounts.

If anyone does know about the CGT implications on declaration of trust etc that would be amazing.

Thank you.

Tom99

[FONT=Verdana, sans-serif]I don't think the Bank will be interested in the deed of trust so just have it ready and sign it on the day you complete. I would go with 99.99% and 0.01% just to be sure there is no CGT.[/FONT]
[FONT=Verdana, sans-serif]But you will be stuck with 3% extra stamp duty if the family member already owns a property.[/FONT]