Stamp duty for multi-buyers inc. 1st time buyer

littlebigjon

We're looking to help our son buy his first house. We have our own property already, he's a first time buyer.
The split will be approx £70k/£100k for a £170k house, him/us. We don't really want to gift him all the money which would save on stamp duty, but retain an interest in the property by paying the stamp duty.
My question is;
What, if any, is the effect on stamp duty paid given he is a first time buyer and we are not?

ACG

You might find that the bigger issue is gifting money that is not a gift.
If you go on the deeds, stamp duty will be chargeable.

OUNN

If the property is purchased as Joint tenants or Tenants in common, the extra 3% stamp duty will be due because you already own your property.

Will the property be purchased mortgage free? If that's the case have you considered lending him the money and putting a charge on the property?

Would avoid the extra stamp duty I believe.

littlebigjon

He would have a mortgage on the property of about £70k. We wouldn't.

00ec25

if you go on the deeds you'll need to:
a) be on the mortgage as lenders don't allow owners not party to the mortgage
b) son will lose the FTB exemption and the whole purchase price of 170k will be liable to the higher rate SDLT because you are purchasing an additional property as co-owner with son
c) you will be liable for capital gains tax when you/your son sells up eventually

as others suggest, you need a different way to fund this "gift" / your investment. How do you expect to benefit from your investment? How would you get your money back seeing as it will be his home and he may not want to sell it when you want the money?

read the guide?
https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

"All the purchasers must be first time buyers."

G_M

Either this is a gift, or it is an investment in a property, or it is a loan. It cannot be all at once.

1) As a gift, it is straightforward.

* You give him the money.
* he declares the gift to his mortgage lender
* he buys the property in his own name as a FTB
* he benefits from FTB reduced SDLT
* you do not see your money again.

2) as an investment

* You & he jointly apply for a mortgage
* You & he jointly buy the property
* You and he payy the additional 3% SDLT as you are a 2nd property owner
* When the property is sold, you declare any increase in value to HMRC and pay CGT on your share as the property is not your main residence


3) as a loan

* You loan him the money, with a Deed confirming the loan
* he declares the loan to his mortgage lender
* Many lenders will refuse to lend to him due to the financial burden on him. Use a mortgage broker to find onw who will lend
* he buys the property in his own name as a FTB
* he benefits from FTB reduced SDLT
* You place a 2nd Charge on the property (asssuming the mortgage lender agreees.
* You get back your money as per the agreement in the Deed (eg monthly payments, or when he sells)

littlebigjon

Thanks everyone, food for thought.
Our main reason is to get him onto the property ladder rather than him paying out rent to a third party. We're not so interested in it as an investment, and will probably take the sensible option which is not to gift him the money (for the sake of about £6k stamp duty) and retain an interest in the property. Much as we trust him, no one can predict the future and i think we would sleep easier at night if we were joint mortgageurs.
Thanks again

G_M

littlebigjon wrote: »

Thanks everyone, food for thought.
Our main reason is to get him onto the property ladder rather than him paying out rent to a third party. We're not so interested in it as an investment, and will probably take the sensible option which is not to gift him the money (for the sake of about £6k stamp duty & the potential future Caapital Gains Tax) and retain an interest in the property. Much as we trust him, no one can predict the future and i think we would sleep easier at night if we were joint mortgageurs.
Thanks again

:beer::beer::beer::beer::beer:

ACG

It is not quite as simple as G_M says.
For example, there are lenders who will allow you to lend the deposit where it is repayable only on sale of the property - but you may find it difficult to force the sale in the future if you ever wanted to...The issue here is that I only know of one lender.

There is also a lender who allows more on the deeds than on the mortgage - but then stamp duty is payable.

There is also the option of doing a declaration of trust.

But all of these routes limit your sons options for a Mortgage. It is probably not a bad idea to speak to a Mortgage broker and a solicitor.

kingstreet

00ec25 wrote: »

if you go on the deeds you'll need to:
a) be on the mortgage as lenders don't allow owners not party to the mortgage

There is one which allows this as it has/uses what's known as an A2 Indirect Charge.

kingstreet

As ACG says and taking G_M's third option, let him purchase the property in his sole name and take a second charge over it to secure your "investment."

Then there are no SDLT implications.

There are at least two lenders who will accept this, probably more if you seek independent broker advice and they have chance to research others...