Stamp Duty Consideration Question

twilightzone

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) 
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration.

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.

Hope this makes sense!

Thankyou
 

AdrianC

Your mother owns a house. She is giving it to you. £220k gift.
You will then be mortgaging it and letting it.
You are then buying a flat, where your mother will live.

I presume you already own your own home?

No, there's no SDLT on a gift, no matter how large.
Yes, you will pay +3% on the flat purchase.

Why doesn't your mother sell the house, and buy her own flat?
Has your mother considered deprivation of assets issues for any future care needs?

Do the profits from letting the house out, with a ~70% mortgage against it, make financial sense?
How long will the taxed post-mortgage profits of that take to repay the SDLT on the flat?
Will you be repaying the mortgage, rather than taking the profits, and how fast?

twilightzone

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

AdrianC

twilightzone said:

Sorry, just to add.
The Flat would be in my mums name even though i'm buying it, maybe that matters.. maybe not.

If it's "in your mum's name", then it's her flat, not yours. She pays normal-rate SDLT on it. You are not her landlord.

So you're borrowing money against the house, then gifting that money back to her to buy her flat? (She's only gifted you £70k all-in)
Or will you have a charge against the flat for the money you lend her? (She's gifted you £220k, you lent her £150k of it straight back)

[Deleted User]

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) 
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration.

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.

Hope this makes sense!

Thankyou
 

This seems like a very odd way of going about things. Your mum could sell her house to you for £150k and that’s the consideration you’d pay SDLT on. You could use a BTL mortgage for the purchase with the £70k is gifting you as the deposit. 

Your mum would then have £120k to buy herself a flat and she’d pay SDLT on the £120k and £30k for any the costs of buying and doing the place up. 

Much neater especially in terms of SDLT. 

SDLT_Geek

It is not a "gift" of the house to OP from the mother for SDLT purposes, if, in return the mother is being given a flat.

[Deleted User]

Alternatively your mum sells her house for £220k, buys herself a flat and has a nice lump sum leftover to spend. No need to involve you at all. 

twilightzone

Lover_of_Lycra said:

Alternatively your mum sells her house for £220k, buys herself a flat and has a nice lump sum leftover to spend. No need to involve you at all. 

The issue is, the flat she wants will go and the house would need to sell very quickly. She was going to tranfer the house to me anyway and continue living there initially

twilightzone

Lover_of_Lycra said:

twilightzone said:

Hi there,
Can someone please advise me on this, as i seem to have read conflicting information.
My mother wants to downsize and is transferring her house to me, it is valued at £220,000 and I plan to raise a 'buy to let' ( or rather 'let to buy' to be precise ) 
I will then be buying a flat valued at £120,000  for my mother with the mortgage raised, and also a little extra for improvements  to make it more liveable for her. So £150,000 mortgage. She would not be paying me any rent, i would instead be receiving rental income from the house gifted to me.

Now, my understanding was that i would pay Stamp Duty of 3% on the purchase of the flat, and nothing for receiving my mothers house as there was no consideration.

However, a mortgage broker seems to disagree with this and has suggested I would need to pay stamp duty on the market value of my mothers property and not the purchase price, as that value is being used as the purchase price for mortgage purposes in order to get a £150,000 mortgage.

Hope this makes sense!

Thankyou
 

This seems like a very odd way of going about things. Your mum could sell her house to you for £150k and that’s the consideration you’d pay SDLT on. You could use a BTL mortgage for the purchase with the £70k is gifting you as the deposit. 

Your mum would then have £120k to buy herself a flat and she’d pay SDLT on the £120k and £30k for any the costs of buying and doing the place up. 

Much neater especially in terms of SDLT. 

Well the problem here is that, if i'm buying my mums house as a buy to let for 150k (as per your suggestion)  i wouldn't be able to get a mortgage for the full amount of 150k.  only 75% i believe?

That leave me having to pay a deposit.

Thanks for replies

twilightzone

SDLT_Geek said:

It is not a "gift" of the house to OP from the mother for SDLT purposes, if, in return the mother is being given a flat.

The question was more about  the consideration for SDLT purposes, the mortgage lender is suggesting its should be the market value of my mums house, rather than the amount i paid. Which is the consideration in question £120,000 im paying for the house effectively.. by way of buying the flat.

twilightzone

I do apologise if its become unclear, i am trying to explain the best i can.

Upshot is that i'm effectively paying £120,000 for my mums house by purchasing her a flat and raising a mortgage on her old house as her income is too low to do it herself.  

The issue i have is that i;m trying to raise 150k mortgage for a house i've effectively paid 120k for.  They want to use 150k as the purchase price for SDLT purposes, when' im only effectively paying 120k