NatWest Concessionary/Discount Purchase Stamp Duty Land Tax

Tw1

Can any one help?

Context - Family member (Father) willing to sell his second home to us for under market value. NatWest call it a discount purchase. Other lenders like Nationwide call it Genuine Bargain Price. Coventry also do this. I believe Concessionary purchase is the technical term.

Market value £600,000
Discount price £340,000

We can borrow £314,000 From NatWest
We will add £26,000 of our own cash.

NATWEST say that there are two routes.

1) (NOT MY FIRST CHOICE) Just use our deposit to raise a mortgage so we would have to have £34,000 a 10% deposit thus meaning we fall into 90% LTV products and can only borrow less £275,000. THIS IS NOT A CONCESSIONARY PURCHASE. This is a standard purchase. BUT PURCHASE PRICE IS £340,000 = £17,200 SDLT or £7000 if no other property owned.

2) (THIS IS THE ROUTE I WANT TO TAKE) Market value 600K BORROW 314K THUS LTV is 52%. GIFTED EQUITY 260K + 26k cash ACTS AS OUR so called DEPOSIT?? If the LTV is 60% or under then I can borrow the desired 314k

BUT ON THE MORTGAGE OFFER it says the purchase price is £600,000

BTW NatWest say Father has to write a letter saying that the difference is a gift and that he has no further interest in the property.

IMPORTANT FACT - We own a BTL flat and want to keep it as a rental property. We could sell within 3 years and reclaim the extra £10,200 sdlt

So the residential purchase will attract the higher 3% SDLT rate.

SO HERE is the big question.

IF WE CHOOSE OPTION 2 (see above) Mortgage offer says purchase price £600,000 = Borrowing £314k + £26k Cash savings + £260,000 gifted equity.

Is SDLT payable on

£600,000 = SDLT £38,000

Or

£340,000 = SDLT £17,200

One broker says that it can be done to get the SDLT on the £340k even though the mortgage offer says £600k. His solicitor says he can also do it for me to save the higher SDLT.

However another solicitor says if the bank wants the purchase price to be £600k then the SDLT will be based on that.

NatWest can't advise on SDLT.

Some brokers can't or wont advise.

So this is really a solicitor question!

Has anyone done what we are trying to do With NatWest? If so I would love to speak with your solicitor!

Here is what NatWest say on their intermediary site.
Discounted purchase
Transactions at undervalue/gifted deposits: the purchase of a property from a family member or family business where the purchase price is less than the value and the vendor does not receive any monies for the difference between the purchase price and the valuation.

This situation is only permitted where there is a family connection and is subject to the solicitors providing a clear report on title or appropriate indemnity insurance. The maximum lend can be based on the valuation, not the actual purchase price. Provision of monies over and above the actual purchase price can be agreed at underwriter/sanctioner discretion subject to standard maximum LTV/FTVs

I am going with the hope that SDLT WILL ONLY BE PAYABLE ON the Net money transferred 340k aka the chargeable consideration!

Thanks

davidmcn

SDLT is calculated on the net consideration.

Tom99

Tw1 wrote: »

IMPORTANT FACT - We own a BTL flat and want to keep it as a rental property. We could sell within 3 years and reclaim the extra £10,200 sdlt

You will only be able to reclaim if this flat was your main residence in the 3yrs before you buy the new property.

Tw1

Dear Tom,
Please can you confirm that the net consideration in this case is £340k using option 2. Thanks so much

Tw1

Sorry I was meant to say Davidmcn re the Net consideration.

Tw1

Tom99 wrote: »

You will only be able to reclaim if this flat was your main residence in the 3yrs before you buy the new property.

Hi Tom99
I lived in the property as my main residence from 2014-2015. Is this ok?

SDLT_Geek

As you last lived in the flat in 2015, more than three years ago, later selling the flat will not entitle you to reclaim the extra 3% SDLT.

Tw1

Thanks SDLT Geek for confirming this.

How about the stamp duty? Is it 17.2k or 38k

Thanks

SDLT_Geek

Lenders can confuse things with different terminologies and particular requirements as to their funding. The SDLT treatment comes down to the chargeable consideration which is usually the amount stated on the contract and transfer as the price.

So on route 1 that is £340,000 and on route 2 it is likely to be £600,000. On route 2, the structure is that you are gifted cash and use the cash to make up the price paid to a full £600,000. Although the cash will not actually be transferred to and fro, the effect of the structure is likely to be that the cash is treated as gifted and then paid back.

Tw1

We are not being gifted any cash. It is gifted equity.

So the only chargeable consideration is 340k.

I agree some lenders don't make it easy to understand but it is down to what the solicitor then makes clear to the bank. I believe the solicitor can write first explaining the situation.

SDLT_Geek

Yes, that is fine so long as it is documented that way, with the contact and transfer showing the price of £340k.

That is what I would call “gifted equity”, but lenders do tend to tie themselves up in knots, muddying the waters as between:
(a) gifted equity, price £340k and
(b) gifted deposit, price £600k
With lots of other ill defined terminology in between!