Buying a first home in a marriage where one of you already owns property is complicated.

amlyo

My newlywed wife and I live together in a home she owns (leasehold) as our main residence. I do not own and have never owned property and we're looking to move into a home costing slightly more than hers did when she bought it as a first time buyer two years ago, but both are valued under £250k. We can afford to keep the current house and we'd like to do so, because we think property is a pretty good place to store wealth. Either a close family member will live in our current home rent-free, or we'll let it out.

I thought this would be a really common well-known situation but we're really struggling to research what the options and implications are. Has anyone else been in this scenario? Any thoughts, insights, suggestions welcome!

Solution 1: I apply for a mortgage in my name and become sole owner of the new property we use as our main residence. Current property stays in my wife's name and ceases to be our main home.
Thoughts: Not sure if we have to pay higher rate SDLT on new property, old property, or both. Not sure if we need to speak to wife's mortgage provider about this or if there are any complications because they think currently she's living in her property as her main home. 

Solution 2: We jointly apply for mortgage on new property and become joint owners. Current property stays in wife's name as a second home.
Thoughts: I like the idea of us jointly having a stake in our family home. Not sure how this effects tax or mortgage offers.

Solution 3: Actually this is far more complex than we thought. Sell the current property, use the equity to pay off a bigger chunk of the mortgage on the new place and just become joint owners of our new home.

Mickey666

So basically, if you pooled your resources you could afford to buy a house for around £500k?

Should be able to find something very nice for that, so what's the problem?

amlyo

Well, the place we want to move to is great for starting our family, but affordable enough that short of the entire economy collapsing it's not realistic that we'll ever face financial hardship that jeopardises our home.

Caz3121

How much equity is there in your wife's property? she may get consent to let for a limited time period but she would likely be looking at some point to change to a buy to let mortgage (or a regulated buy to let if it was family member living there) These tend to sit around the 75% LTV mark so may have to invest further into the property if LTV currently higher than that
Higher rate SDLT would apply to the new property (you are married so does not matter if only in one name it will still apply) This could be reclaimed if her current property is sold within 3 years of purchase
Have you researched much into starting a residential letting business and the requirements and tax implications?....you may decide on option 3