Second Home Stamp Duty when loaning to family member

katherineanddave

Advice would be gratefully received!
My sister is a first-time buyer and purchasing a flat for 127.5k. She has 21k towards the deposit and I am loaning her 21k. The mortgage will be solely in her name.
Our agreement is that I will have a beneficial interest in the property, going on the deeds as a beneficial owner, and on any future sale would receive back my loan and we will divide any equity as per the different amounts of monies put into the property.
This will be reflected in a loan declaration to the lender and detailed in a Deed of Trust.
I own my own mortgaged house.
Re the Higher Rate of SDLT will we have to pay £3875 as I am classed as buying a second home or does as my ‘chargeable consideration’ is less than 40k does this mean we pay none?

Pixie5740

I think the higher rate will apply because the total purchase price is more than £40k and because the higher rate will apply your sister will also lose the FTB relief.

Maybe it's how this particular lender operates but it seems a bit odd to be a lender and a beneficial owner. If you were just a lender, had no interest in the property, and secured a second charge against the property instead your sister would benefit from the FTB relief because the higher rate of SDLT would no longer be an issue.

foxy-stoat

katherineanddave wrote: »

Re the Higher Rate of SDLT will we have to pay £3875 as I am classed as buying a second home or does as my ‘chargeable consideration’ is less than 40k does this mean we pay none?

No - I dont think you can get away with zero stamp duty due to your input with the deposit of £21,000 - assuming you will be jointly liable with your Sister.
You wont be able to be on the deeds without being on the mortgage - unlikely any lender will agree to that.
Is the lender aware that the £21K is a loan from you?

katherineanddave

Thanks for the reply.
I have signed a loan declaration for sisters mortgage lender, and she has an offer confirmed.
Appears that I go on the property deed as a beneficial owner, but sister remains 100% legal owner.

katherineanddave

...So although my interest is less than 40k the higher rate still applies?

SDLT_Geek

Either you have a beneficial share in the property or your sister has 100% underlying ownership. It cannot be both!


If you have any share in the ownership at all, however small (whether or not you are a registered proprietor) the higher rates of SDLT will apply.


Having a share in the property in the property is a different thing to lending her money.