stamp duty - order of buying two houses

langtonhighway

I have scoured the threads and also the government website, and consulted a conveyancing solicitor, and still can't seem to get a reliable answer.....

I own a house, with a mortgage. I am planning to sell the house, and move into temporary rented accommodation for various reasons. Then, I will be buying two houses. One for my adult son, of about 90k, and one for myself with a further mortgage of about 285k.

I understand that if I own two properties I pay more sdlt. But, as far as I can see, if I buy the 90k house first, then I pay the extra on the 285k house. But if I buy the 285k house first, then there is no extra to pay on the 90k house..... is this right?

Sadly, circumstances mean buying the 90k house is likely to come first. Does that mean I can't avoid the extra tax, or should I try harder to buy the 285k house first?

Thanks in advance

davidmcn

You'll be paying extra on whichever is the additional property i.e. the second one you buy.

Is there a reason for your son's house being in your name rather than his, as that would be an obvious way to reduce the cost?

chunkytfg

The extra 3% SDLT is payable on the total price of the property. if you bought that 90k one second it would be £2700. the £285k property would be £12800.

I'd be trying really hard to buy the expensive one first!!


Edit - Beaten to it!

dimbo61

Buy your own home first.
Could you look at a rental place for your son for a short period of time ?

Smi1er

If you're buying a house for your son is there a reason why you simply don't gift him the £90K when buying it? Therefore you'll only own one house

saajan_12

langtonhighway wrote: »

I have scoured the threads and also the government website, and consulted a conveyancing solicitor, and still can't seem to get a reliable answer.....

I own a house, with a mortgage. I am planning to sell the house, and move into temporary rented accommodation for various reasons. Then, I will be buying two houses. - how long between selling and buying? Under 3 years? One for my adult son, of about 90k, - why are you buying this? You'll pay extra SDLT and CGT when you eventually sell it. Plus will son be paying you rent? Then you'll pay income tax and have legal landlord responsibilities.. and one for myself with a further mortgage of about 285k. - okay

I understand that if I own two properties I pay more sdlt. But, as far as I can see, if I buy the 90k house first, then I pay the extra on the 285k house. - correct, £12.8k at higher ratesBut if I buy the 285k house first, then there is no extra to pay on the 90k house..... is this right? - no, then the 90k house is your second residence so you pay £4.25k on the first house and £2.7k on son's house, giving a total £7k.

Sadly, circumstances mean buying the 90k house is likely to come first. Does that mean I can't avoid the extra tax, or should I try harder to buy the 285k house first?

Thanks in advance

If you must buy both, then making the 90k one first would save you £5,850.

However if you don't buy son's house in your name at all, then you would save another £2,700 in stamp duty, plus capital gains tax when you sell, plus any costs / taxes from being a landlord and receiving rent. Instead, you could loan your son the money to buy in his own name. You place a charge on son's house so it can't be sold without paying you back, and you can specify what repayments your son shoudl make if any.
.. much more tax efficient and lighter on legal responsibilities.

langtonhighway

Thanks,

I can't afford to just gift son the money - or buy him the house in his name - it's to get him somewhere closer to his work to live in when I move further away, and save him having to rent. The idea is in 5 or so years or more, he will earn enough to get a mortgage of his own, and I will either rent out or sell that house.

It will be a matter of months between selling and buying, certainly less than a year (I hope!). Son probably won't pay rent, but will save for his own deposit.

I've done the sdlt gov calculator, and the figures come out the same whichever order I put them in, but this doesn't seem to make sense based on the guidelines.

Place a charge?

Thanks again

langtonhighway

also, the hmrc site seems to say that if the second bought property is going to be your main residence, then the higher rate isn't applicable.....

confusing

saajan_12

langtonhighway wrote: »

Thanks,

I can't afford to just gift son the money - or buy him the house in his name - if you buy a house for him to live in then you still don't have access to the capital until he moves out.. so I assume you can afford it day 1? Same thing if you loan son the money. - it's to get him somewhere closer to his work to live in when I move further away, and save him having to rent. The idea is in 5 or so years or more, he will earn enough to get a mortgage of his own, and I will either rent out or sell that house. - at that point, son could sell the property and pay back your loan, or get a bank mortgage which pays you back.. same as you selling it.

It will be a matter of months between selling and buying, certainly less than a year (I hope!). Son probably won't pay rent, but will save for his own deposit.

I've done the sdlt gov calculator, and the figures come out the same whichever order I put them in, but this doesn't seem to make sense based on the guidelines. - what numbers are you getting for each order? we can help see where the mistake is. Certainly shouldn't be the same.

Place a charge? - You loan the money to son, have the repayment agreement written into the deeds of the purchase, so you have legal protection. Its the same as a bank would lend you money as a mortgage and place a charge on the deeds so you have to pay it off before selling the house.

Thanks again

langtonhighway wrote: »

also, the hmrc site seems to say that if the second bought property is going to be your main residence, then the higher rate isn't applicable..... - please quote exactly what you're reading. Generally its if you're also selling your original main residence at the same time or within certain timeframes.

confusing

You can still get the same effect by:
* son buys the property in his own name
* you lend son the money for this and place a charge (ie note in the deeds so your money must be repaid before son can sell it.. you can also specify interest / when he has to make repayments / you can repossess if he doesn't repay in a certain time..)
* in 5 years, son can sell, pay you back and buy elsewhere or get a mortgage for the same property and use the loan to pay you back. He can then pay the mortgage monthly as usual.
* you get the money back, same as if you'd sold the property, and invest in something specifically suited to the rental market, or some other investment.

SDLT_Geek

Assuming you are buying in England and not in Wales and that you have no other properties "counting against you" then it seems to me that:

buying the one for your son to live in when you own nothing else
then on a later date
buying a home for you to live in, meeting the conditions for the replacement exception

means that the higher rates are not due on either.

If you do it the other way round (or on the same day) the higher rates will be due on the one for your son to live in.

AdrianC

You currently own your main residence.
You are selling that and buying a replacement main residence.
Even if you own the rental property, there won't be +3% to pay on the replacement main.

However, because the rental is an additional property, there will be +3% on it, whether you buy it before or after changing your main residence.

The rental for your son will be bought mortgage-free?