Joint house purchase

silverstone-sue

We are considering buying a property together with our daughter who is a first time buyer. We own and live in another property but would benefit from the rent on the second bedroom in the new property which she would let out. We plan to contribute just over half of the purchase price in cash and she would raise a mortgage for the rest of the amount.
So the questions we have in deciding if this is financially worthwhile are:
What would happen about stamp duty? Would there be any reduction with her being a first time buyer or would we actually pay 3% extra being second home owners?
Any ideas on how the tax on rental income would work?!
Are there any other ways of doing this which would protect our money but allow us and our daughter to benefit from the arrangement?
Any thoughts gratefully received?

csgohan4

Lenders go on the now and not on the if regarding lodger income.

Buying a home with your daughter would subject the whole purchase to extra stamp duty.

Also generally money and family shouldn't mix, what if your daughter needed a bigger place, needed to move somewhere else, career e.t.c, marriage kids?? she owuld lose her FTB status as well

There is a rent a room scheme for lodger income

https://forums.moneysavingexpert.com/discussion/5980752/how-to-get-out-of-joint-mortgage-with-mother

https://forums.moneysavingexpert.com/discussion/5947953/stopped-from-being-a-first-time-buyer

AdrianC

silverstone-sue wrote: »

What would happen about stamp duty? Would there be any reduction with her being a first time buyer or would we actually pay 3% extra being second home owners?

If any of the joint owners are subject to +3%, the entire purchase price is subject to +3%.

Any ideas on how the tax on rental income would work?!

It's an interesting one... They would be a lodger if your daughter was the sole landlord - but a tenant if you were a partial landlord.

Are there any other ways of doing this which would protect our money but allow us and our daughter to benefit from the arrangement?

Loan her the money, put a charge on the property. She is sole owner, but it cannot be sold without you getting your money back. It would probably need to be a second charge behind the mortgage lender, and she may find a restricted choice of lender.

G_M

silverstone-sue wrote: »

We are considering buying a property together with our daughter who is a first time buyer. We own and live in another property
so 2nd property SDLT would apply on the purchase price

but would benefit from the rent on the second bedroom in the new property
You would benefit? So you would receive the rent? Then as you are a non-resident landlord, the occupant would be a tenant. You'd need to submit annual tax return, and comply with all leglislation.

which she would let out.
Ah! So she receives the rent? She would be landlord and occupant would be a lodger. Rent a Room Scheme applies.

We plan to contribute just over half of the purchase price in cash and she would raise a mortgage for the rest of the amount.
Most (all?) lenders would require all joint owners to be joint mortgage holders.

So the questions we have in deciding if this is financially worthwhile are:
What would happen about stamp duty?
extra 3%

Would there be any reduction with her being a first time buyer
No

or would we actually pay 3% extra being second home owners? Yes

Any ideas on how the tax on rental income would work?!
Depends who the landlord is. See above.

Are there any other ways of doing this which would protect our money but allow us and our daughter to benefit from the arrangement?

Either

* give her the money (7 year rule on Inheritance Tax applies), or
* lend her the money, with a Charge

HampshireH

.....what if she doesnt let the 2nd room out?

She will be under no obligation to as an owner. Will you be asking her to pay you rent if she she doesnt get a lodger