Buying a 2nd home - Advice

lollipop_1114

Morning all, I am looking for some advice if anyone would be kind enough to assist. 
My father is currently renting a council property and has done so for a very long time. He is now looking to purchase the property from the council, they have quoted 60k. He has asked for myself and my sister to go thirds (20k each) on the property to assist with the purchase and for us to invest. 
I currently have a mortgage on my home with my wife so helping with this purchase would mean that we then own a second home. 
Does anyone have any advise on additional financial costs with this or implications? Would i have to pay stamp duty? Capital gains tax etc etc. Thanks in advance for any advice you can share. I am weighing up the pros and cons at the moment before i agree to go ahead. 

FlorayG

First of all I think you need to check with the council if they will allow it. The discount is for the resident, not for other people to use as an investment. I would think they will require only his name on the deeds

user1977

Helping him with the money doesn't necessarily mean you need to be a joint owner of the property.

theartfullodger

lollipop_1114 said:

Morning all, I am looking for some advice if anyone would be kind enough to assist. 
My father is currently renting a council property and has done so for a very long time. He is now looking to purchase the property from the council, they have quoted 60k. ................

That means HE has to have the £60k to buy it, then purchase in his name.  The council won't sell to him together with other people....

lollipop_1114

theartfullodger said:

lollipop_1114 said:

Morning all, I am looking for some advice if anyone would be kind enough to assist. 
My father is currently renting a council property and has done so for a very long time. He is now looking to purchase the property from the council, they have quoted 60k. ................

That means HE has to have the £60k to buy it, then purchase in his name.  The council won't sell to him together with other people....

Thank you for the replies so far. He has asked us to be joint owners. I believe another family member has done something similar in the past. 

If we did go as joint owners, i am keen to understand what other cost implications there would be. Thanks

user1977

It would bring in "second home" rate of SDLT (or equivalent) on the whole price and you'd have a potential Capital Gains Tax liability on your share.

artyclarty

Check for your own local council/housing association rules. Ours states specifically that the owners can only be the people on the tennancy agreement. One person in the next street over did exactly what you were considering and is now selling up. Once found out they asked for they were asked to pay the discount back as they broke the terms of the agreement. Of course all the court fees were added on top of it when they challenged it, which was a not insignificant sum either...

silvercar

You could lend him the 20k and then put a charging order on the property for your loan.

im not sure about the higher rate SDLT given that you will own less than 40,000.

Bookworm105

lollipop_1114 said:

theartfullodger said:

lollipop_1114 said:

Morning all, I am looking for some advice if anyone would be kind enough to assist. 
My father is currently renting a council property and has done so for a very long time. He is now looking to purchase the property from the council, they have quoted 60k. ................

That means HE has to have the £60k to buy it, then purchase in his name.  The council won't sell to him together with other people....

Thank you for the replies so far. He has asked us to be joint owners. I believe another family member has done something similar in the past. 

If we did go as joint owners, i am keen to understand what other cost implications there would be. Thanks

given his inexperience, has your father got written confirmation that "outside" owners are allowed by that particular council? It would be unusual.

if you are allowed to purchase as co-owner then it appears your share would be 1/3 so with a purchase cost of 60k your share would be below the 40k threshold at which higher rate SDLT would kick in. Obviously standard rate SDLT would apply nonetheless.

as owner of a second home your share of it would be exposed to CGT when father eventually dies or sells up. Voluntarily exposing yourself to CGT is great for the UK, but pretty poor planning by you!

As an "investment" then your father is basically taking a gamble. he may think he is giving you "free" money, but he isn't and should consider all the options....
a) be sole owner and leave to you and sibling on his death. No CGT and probably given the values quoted, no inheritance tax either. But, risk that if father needs to go into a care home the property might need to be sold to fund that so the inheritance would vanish,
or
b) be a co-owner. Face CGT when he dies but your share is protected from care home fees leaving only father's own 1/3rd share to be sued to fund his care. Keep in mind that very few people end up in care homes so don't let the tail wag the dog. (Statistically about 97% of the entire UK population of those aged 65+ never need to go into a care home).
or 
c) if your lender allows it.... you increase the mortgage on your own home and simply give father the cash he needs to fund it himself in full. You then put a charge on his property (with or without an interest rate) to protect your money but the property remains exposed to be sold to fund care home so you'd get your money back, but might not inherit the property.

lollipop_1114

Thank you all for your help!

theartfullodger

Think tenant would have to buy, themselves, alone: Then make others joint owners,,, not at same time... What do the solicitors say? If no solicitors, why not??