SDLT on transfer of equity

mat1964

This is a follow up to an earlier post, but things are confirmed now.

I am buying a house with my partner - was originally sale of 2 houses but her sale has been delayed and we have to complete 1/9 (new build) so I have taken out a mortgage to cover the difference - so the purchase is only in my name as I could not put her on the mortgage (my sale proceeds plus the mortgage).  We have just found out her sale may be resurrected but will not complete in time - so maybe a few weeks later.  (Which also frustratingly means £8.5k in an early repayment fee for the mortgage).  

We are not married and will be living in the property together with no other homes once she sells hers (but her sale will be later).  We did not live together previously - she is still in her house.  As I couldn't put her on the mortgage, it will all be in my name at point of completion (which is the issue).  When she sells and pays off the £430k mortgage she would own 50% of the property.
 
Am I correct in saying if/when she sells and pays off the mortgage, we will also have to pay SDLT on the amount of mortgage paid off (£430k) to put the property in joint names.  That will mean an extra £11.5k SDLT on the £30,250 I will be paying to buy the place  a few weeks earlier. (or an extra £9k if before end Sept).

SDLT_Geek

Yes, this is right.
  
I take it that you are buying for just under £860,000 (SDLT on £860,000 would be £30,500 without the extra 3%).  It seems right that the extra 3% will not apply if you are the sole owner of the property when it is first bought, without your partner having a share.

As and when she pays the £430,000 to acquire a half share in the property, then SDLT is due from her on that payment without the 3% surcharge.  As you say that would be £9,000 if she buys in by the end of September 2021, £11,500 if later.

dimbo61

Not sure about the SDLT question but have you considered an offset mortgage with YBS who do friends and family offset accounts.
You take out an offset mortgage.
You offset any savings you have.
Your partner can also offset any savings they have.
Once they sell their home they can then offset most if not all of the outstanding balance.
Taking a 2 year fix you wait till the end of the fix and pay off the mortgage debt.
Get solicitors to sort out ownership 50/50 once both houses are sold and fix finished.
No ERC to pay. 

mat1964

SDLT_Geek said:

Yes, this is right.
  
I take it that you are buying for just under £860,000 (SDLT on £860,000 would be £30,500 without the extra 3%).  It seems right that the extra 3% will not apply if you are the sole owner of the property when it is first bought, without your partner having a share.

As and when she pays the £430,000 to acquire a half share in the property, then SDLT is due from her on that payment without the 3% surcharge.  As you say that would be £9,000 if she buys in by the end of September 2021, £11,500 if later.

thanks - yes I guess that is it.dimbo61 said:

Not sure about the SDLT question but have you considered an offset mortgage with YBS who do friends and family offset accounts.
You take out an offset mortgage.
You offset any savings you have.
Your partner can also offset any savings they have.
Once they sell their home they can then offset most if not all of the outstanding balance.
Taking a 2 year fix you wait till the end of the fix and pay off the mortgage debt.
Get solicitors to sort out ownership 50/50 once both houses are sold and fix finished.
No ERC to pay. 

interesting idea thank you but given we are completing in 10 days, not going to go through another mortgage application.

saajan_12

mat1964 said:

This is a follow up to an earlier post, but things are confirmed now.

I am buying a house with my partner - was originally sale of 2 houses but her sale has been delayed and we have to complete 1/9 (new build) so I have taken out a mortgage to cover the difference - so the purchase is only in my name as I could not put her on the mortgage (my sale proceeds plus the mortgage).  - whats the issue with putting her on the mortgage? Does she have one on her current place?
We have just found out her sale may be resurrected but will not complete in time - so maybe a few weeks later.  (Which also frustratingly means £8.5k in an early repayment fee for the mortgage).  - ERC will probably be unavoidable unless you get a variable mortgage without a fix or an offset mortgage. - probably late to get a new offer in 10 days though. 

We are not married and will be living in the property together with no other homes once she sells hers (but her sale will be later).  We did not live together previously - she is still in her house.  As I couldn't put her on the mortgage, it will all be in my name at point of completion (which is the issue).  When she sells and pays off the £430k mortgage she would own 50% of the property. - 
 
Am I correct in saying if/when she sells and pays off the mortgage, we will also have to pay SDLT on the amount of mortgage paid off (£430k) to put the property in joint names.  That will mean an extra £11.5k SDLT on the £30,250 I will be paying to buy the place  a few weeks earlier. (or an extra £9k if before end Sept). - yes, she's buying 50% from you, so that bit is effectively stamp dutied twice. Bit of a curveball but can she loan you the 430k, to be paid back when the house is sold (and secured by placing a charge on the property. That way she's not buying into the house, so no SDLT.  

Your understanding of the situation is correct, so I won't get into those details. Here's a few potential workarounds.. all possibly out there or may not suit what you want to do or be possible, so feel free to ignore some or all. 

1. Find a lender which will accept her, so you both buy now -> pay extra 3% SDLT now, but get that refunded when she sells her place (assuming she's been living there as her main residence?
2. To avoid ERC, try find a variable mortgage or bridging loan without a fixed period (even if high interest, as you won't be paying it for long)
3. To avoid extra SDLT, she doesn't buy with you but makes a private loan of £430k, secured as a charge on the property (similar to a mortgage). So when you sell, she gets her money back. 
4. To avoid extra SDLT & ERC, keep the mortgage on and she invests her money into stocks & shares. Up to you how you share household bills etc. 

mat1964

saajan_12 said:

mat1964 said:

This is a follow up to an earlier post, but things are confirmed now.

I am buying a house with my partner - was originally sale of 2 houses but her sale has been delayed and we have to complete 1/9 (new build) so I have taken out a mortgage to cover the difference - so the purchase is only in my name as I could not put her on the mortgage (my sale proceeds plus the mortgage).  - whats the issue with putting her on the mortgage? Does she have one on her current place?
We have just found out her sale may be resurrected but will not complete in time - so maybe a few weeks later.  (Which also frustratingly means £8.5k in an early repayment fee for the mortgage).  - ERC will probably be unavoidable unless you get a variable mortgage without a fix or an offset mortgage. - probably late to get a new offer in 10 days though. 

We are not married and will be living in the property together with no other homes once she sells hers (but her sale will be later).  We did not live together previously - she is still in her house.  As I couldn't put her on the mortgage, it will all be in my name at point of completion (which is the issue).  When she sells and pays off the £430k mortgage she would own 50% of the property. - 
 
Am I correct in saying if/when she sells and pays off the mortgage, we will also have to pay SDLT on the amount of mortgage paid off (£430k) to put the property in joint names.  That will mean an extra £11.5k SDLT on the £30,250 I will be paying to buy the place  a few weeks earlier. (or an extra £9k if before end Sept). - yes, she's buying 50% from you, so that bit is effectively stamp dutied twice. Bit of a curveball but can she loan you the 430k, to be paid back when the house is sold (and secured by placing a charge on the property. That way she's not buying into the house, so no SDLT.  

Your understanding of the situation is correct, so I won't get into those details. Here's a few potential workarounds.. all possibly out there or may not suit what you want to do or be possible, so feel free to ignore some or all. 

1. Find a lender which will accept her, so you both buy now -> pay extra 3% SDLT now, but get that refunded when she sells her place (assuming she's been living there as her main residence?
2. To avoid ERC, try find a variable mortgage or bridging loan without a fixed period (even if high interest, as you won't be paying it for long)
3. To avoid extra SDLT, she doesn't buy with you but makes a private loan of £430k, secured as a charge on the property (similar to a mortgage). So when you sell, she gets her money back. 
4. To avoid extra SDLT & ERC, keep the mortgage on and she invests her money into stocks & shares. Up to you how you share household bills etc. 

thank you but I couldn't put her on the mortgage as she is retired with no income at the moment.  The bridging loan is an idea although not much time to arrange and we don't know for sure if her sale is going to go through.  Will also look into 3 - we've discussed and ruled out 4.

getmore4less

When you changed to needing the mortgage why did you look at the options then which avoid the SDLT and ERC?

Sole borrower joint proprietor
No/low ERC products or short term(2y) fix and just wait a bit.

mat1964

getmore4less said:

When you changed to needing the mortgage why did you look at the options then which avoid the SDLT and ERC?

Sole borrower joint proprietor
No/low ERC products or short term(2y) fix and just wait a bit.

Couldn't get a mortgage with sole borrow/joint proprietor.

I did try and get no ERC but the only one I could find was with HSBC and but they would not lend the full amount I needed.  The 2 year fix was the best I could get.  

The mortgage was originally a back up and we hoped we would not need it.  Anyway, we are where we are.  We'll just have to take the hit given there does not seem to be a work around.