Buying with a friend - she’s a FTB, I’m not

7sefton

Hi all-

I’d really appreciate any advice on my situation below

I bought my first flat three years ago. It’s small in an op-and-coming part of South London. Mortgage repayments are about £780 per month (fixed until end of 2020), and similar places rent for £1200 per month locally. I like the area and it has a lot going for it.

I’ve been planning to sell at the end of 2020 and buy somewhere bigger and more central (personal preference based on my lifestyle). However I had a conversation with a friend today who is a first time buyer and looking to buy somewhere in London in 2019. We both earn the same amount and trust each other 100%.

We’re seriously considering buying somewhere between us next year. Our combined budget would be about £650k on a 82% LTV. Both would plan to live there for at least 5 years and would draw up the appropate legal docs (we’re both lawyers!).

The idea really appeals to me - it allows to me move central much quicker than I thought, live with someone I like, and keep my current flat as an investment.

However:
-what would happen with stamp duty? I would already own somewhere, but my friend would be a FTB.
- what would the tax implications be on my current flat that I rent out?
- I could ask my current mortgage lender for permission to let, but what would happen at the end of my current mortgage deal... would I need to switch to a BTL mortgage, and what would this be likely to cost?

Any other thoughts welcome - thanks so much!

Pixie5740

7sefton wrote: »

Hi all-

I’d really appreciate any advice on my situation below

I bought my first flat three years ago. It’s small in an op-and-coming part of South London. Mortgage repayments are about £780 per month (fixed until end of 2020), and similar places rent for £1200 per month locally. I like the area and it has a lot going for it.

I’ve been planning to sell at the end of 2020 and buy somewhere bigger and more central (personal preference based on my lifestyle). However I had a conversation with a friend today who is a first time buyer and looking to buy somewhere in London in 2019. We both earn the same amount and trust each other 100%.

We’re seriously considering buying somewhere between us next year. Our combined budget would be about £650k on a 82% LTV. Both would plan to live there for at least 5 years and would draw up the appropate legal docs (we’re both lawyers!).

The idea really appeals to me - it allows to me move central much quicker than I thought, live with someone I like, and keep my current flat as an investment.

However:
-what would happen with stamp duty? I would already own somewhere, but my friend would be a FTB.
- what would the tax implications be on my current flat that I rent out?
- I could ask my current mortgage lender for permission to let, but what would happen at the end of my current mortgage deal... would I need to switch to a BTL mortgage, and what would this be likely to cost?

Any other thoughts welcome - thanks so much!

These SDLT scenarios come up on the forum on a daily basis. If you jointly buy the new property whilst keeping your old one the higher rate of SDLT will apply and your friend will lose the SDLT relief currently available to FTB.

CTL isn't granted forever, at some point you will need to move to a BTL mortgage. Like any mortgage the fees and interest rates vary from one lender to another so it's impossible to say what it will cost you in the future.

7sefton

Pixie5740 wrote: »

CTL isn't granted forever, at some point you will need to move to a BTL mortgage. Like any mortgage the fees and interest rates vary from one lender to another so it's impossible to say what it will cost you in the future.

But they’re likely to be at a premium vs residential mortgages?

AdrianC

7sefton wrote: »

However:
-what would happen with stamp duty? I would already own somewhere, but my friend would be a FTB.

FTB SDLT incentives wouldn't apply, but they don't apply on properties over £500k anyway.

- what would the tax implications be on my current flat that I rent out?

If you keep your existing flat, then you're paying +3% SDLT on the entirety of the new flat's purchase price.


That, alone, is very likely to make letting your existing flat uneconomic.

- I could ask my current mortgage lender for permission to let, but what would happen at the end of my current mortgage deal... would I need to switch to a BTL mortgage

Probably. Or you could just keep your existing mortgage...

and what would this be likely to cost?

Nobody has any idea what'll be on the market in two years time...