Stamp Duty Consideration Question

twilightzone

Sorry, the want to use the market value for SDLT purposes. 

I will get this right eventually.... arghhhh

Soot2006

Normal chain sale - sell house, buy flat, live off remaining cash or gift it to you (deprivation of assets worth knowing about but hopefully doesn't come into it if she's fit and healthy) - tidy transactions.

twilightzone

Soot2006 said:

Normal chain sale - sell house, buy flat, live off remaining cash or gift it to you (deprivation of assets worth knowing about but hopefully doesn't come into it if she's fit and healthy) - tidy transactions.

Yeah, if we wanted to sell the house thats the way we would proceed. But were not, and also trying to move in quickly before the flat goes, she is extremely fussy and its taken years up til now.. its quicker and safer this way to secure her the flat she wants whilst having no urgent need to consider low ball offers on her house..

 I;m also looking at a possible future security with having rental income.

I wish we could edit posts.... 
i maybe should start again lol
if we simplify this all,  if i paid her cash of 120k for her house and there was no flat involved at all. My consideration is 120k.. it's all straight forward and SDLT is 3 percent of 120k. (as it's a second home for me)

My mum then buys the flat for 120k and pays zero SDLT, as its her primary residence and is below the threshold

However, because of the mortgage i;m after.. they expect me to pay the SDLT at market value of my mums house when im not convinced this is right.

[Deleted User]

twilightzone said:

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

You missed the part about using the £70k of gifted equity as the deposit. 

[Deleted User]

twilightzone said:

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

It is clear what you’re trying to do and that’s why I, and others, can see you are over complicating things. 

twilightzone

Lover_of_Lycra said:

twilightzone said:

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

It is clear what you’re trying to do and that’s why I, and others, can see you are over complicating things. 

Maybe, but my question is only pertaining to the stamp duty consideration and not about which way to handle the house transfer and flat purchase. We don't necessarily want to sell the house, so we can decide what to do with it in our own time after getting quotes and costing how much it would be to make it fit for rental., if not fit for rental it would be renovated and sold instead.. This all takes time and we don't want to make this decision right now.  We want her moved in quickly before the flat goes as i'[ve already stated.

Typically when applying for a mortgage you have a deposit and get a mortgage for the rest of it.
as we're doing this all at once, some confusion has arisen i think and i'm trying to work this all out before we proceed.

So the typical questions when getting a mortgage are,  how much are you buying the house for....... answer is £120,00
How much is the house worth... answer is £220,000

When you fill out forms online the mortgage is calculated on the house value, not what you paid for it. so i presumed you could raise a 150k mortgage quite easily on a house worth £220k

However, the mortgage brokers appear to be suggesting that i need to pay stamp duty for the market value of the house at £220k, even though i'm only paying £120k..  if i need to pay stamp duty on 150k instead, thats fine but what i don't understand is why i need to pay stamp duty on the Market Value of the house! 

[Deleted User]

I give up. If you want to maximise SDLT then as you were. 

SDLT_Geek

twilightzone said:

Maybe, but my question is only pertaining to the stamp duty consideration and not about which way to handle the house transfer and flat purchase. We don't necessarily want to sell the house, so we can decide what to do with it in our own time after getting quotes and costing how much it would be to make it fit for rental., if not fit for rental it would be renovated and sold instead.. This all takes time and we don't want to make this decision right now.  We want her moved in quickly before the flat goes as i'[ve already stated.

Typically when applying for a mortgage you have a deposit and get a mortgage for the rest of it.
as we're doing this all at once, some confusion has arisen i think and i'm trying to work this all out before we proceed.

So the typical questions when getting a mortgage are,  how much are you buying the house for....... answer is £120,00
How much is the house worth... answer is £220,000

When you fill out forms online the mortgage is calculated on the house value, not what you paid for it. so i presumed you could raise a 150k mortgage quite easily on a house worth £220k

However, the mortgage brokers appear to be suggesting that i need to pay stamp duty for the market value of the house at £220k, even though i'm only paying £120k..  if i need to pay stamp duty on 150k instead, thats fine but what i don't understand is why i need to pay stamp duty on the Market Value of the house! 

Perhaps what will help OP is something on the difference in purchase structures dictated by lenders as between:
(a)  Gifted deposit type arrangements when the property is sold at full value and SDLT is paid on that full value and 
(b)  Gifted equity / concessionary purchase / transfer at undervalue / family discount / genuine bargain price.
That is explained here: https://www.blakemorgan.co.uk/bank-of-mum-and-dad-concessionary-purchases/ 

twilightzone

Lover_of_Lycra said:

I give up. If you want to maximise SDLT then as you were. 

You give up, because we can't sell the house right now.?     hey if we both kill ourselves now instead would that make it even easier? 
Thankyou for your replies, but it's not a viable option for us, and more importantly.... a different solution wasn't the question here.

twilightzone

SDLT_Geek said:

twilightzone said:

Maybe, but my question is only pertaining to the stamp duty consideration and not about which way to handle the house transfer and flat purchase. We don't necessarily want to sell the house, so we can decide what to do with it in our own time after getting quotes and costing how much it would be to make it fit for rental., if not fit for rental it would be renovated and sold instead.. This all takes time and we don't want to make this decision right now.  We want her moved in quickly before the flat goes as i'[ve already stated.

Typically when applying for a mortgage you have a deposit and get a mortgage for the rest of it.
as we're doing this all at once, some confusion has arisen i think and i'm trying to work this all out before we proceed.

So the typical questions when getting a mortgage are,  how much are you buying the house for....... answer is £120,00
How much is the house worth... answer is £220,000

When you fill out forms online the mortgage is calculated on the house value, not what you paid for it. so i presumed you could raise a 150k mortgage quite easily on a house worth £220k

However, the mortgage brokers appear to be suggesting that i need to pay stamp duty for the market value of the house at £220k, even though i'm only paying £120k..  if i need to pay stamp duty on 150k instead, thats fine but what i don't understand is why i need to pay stamp duty on the Market Value of the house! 

Perhaps what will help OP is something on the difference in purchase structures dictated by lenders as between:
(a)  Gifted deposit type arrangements when the property is sold at full value and SDLT is paid on that full value and 
(b)  Gifted equity / concessionary purchase / transfer at undervalue / family discount / genuine bargain price.
That is explained here: https://www.blakemorgan.co.uk/bank-of-mum-and-dad-concessionary-purchases/ 

Thankyou, very grateful for this link.