Buying the next door house — costs and considerations

NewOxfordHistory

Hi!

Not sure which forum is best for this since it is a mixture of house buying and planning. But thought I would try here. Sorry if it is the wrong one. I have also searched and saw some old threads on this topic but nothing recent so hoped people wouldn’t mind me asking again.

We live in an end of terrace house, mortgaged with about 30-40% LTV.

The next door house has come up for sale. Various circumstances mean we are in a position to buy it, mortgage free, which is our plan. We desperately need some more space.

We don’t want to knock the two houses into a single proper house (e.g. with one door, one set of stairs etc) for three main reasons:

a) We don't have the money for a big construction project. Nor the enthusiasm.

b) The combined house would be very, very strange for the area and basically unsalable in the future should we decide to move.

c) We’d quite like it to have a degree of self-containment so when we have people stay they can use its own kitchen etc. We are tripping over each other at the moment when that happens.

Clearly, just owning two houses next to another is quite straight-forward. However, I think it is a bit of an expensive route since:

a) We would have to pay for CGT for house 2 on sale since we wouldn’t get any primary residence tax relief on it.

b) We’d have to pay two lots of Council Tax and Insurance etc and I guess they might be expensive due to house 2 being often unoccupied at night and a second home.

I was therefore looking at seeing if they could be joined, legally, into a single property. I presume that would actually require some building work to connect them and then some paperwork, but I’m trying to get a sense of what would be needed.

As for building work, I was thinking of something fairly minimal like just putting a connecting door on one of the floors. That way we could get between them without going outside but also keep them reasonably self-contained. It would also make it relatively easy to reverse everything when it comes to selling them. I think we could do this whilst keeping the building separate on paper, although that might be a bit odd.

As for paperwork, I’ve read that you don’t necessarily need planning permission to join two houses but you might do to separate them in future. But I can’t find anything relatively definite or recent about this. Has anyone else had any experience of this? 

I guess it would then be a question of getting consents from the mortgage company, the valuation agency and moving on from there. I feel like this would be a bit of hassle but perhaps not too bad nor expensive and worth in the potential savings, particularly CGT if we stay for a while and are lucky about house prices.

However, since this is a new world for me and happened rather suddenly, I’m not quite sure if I have thought about everything properly or missed something. That’s why if anyone could flag anything up I’d be grateful.

Thanks!

lincroft1710

Putting in a connecting door will NOT mean they are a single dwelling for Council Tax purposes. Don't forget in some areas 2nd homes can have a 100% CT premium. 

NewOxfordHistory

lincroft1710 said:

Putting in a connecting door will NOT mean they are a single dwelling for Council Tax purposes. Don't forget in some areas 2nd homes can have a 100% CT premium. 

Thanks. Do you mean “it won’t because you would then have to apply to the Valuation Office Agency for re-banding” or “the Valuation Office Agency would require a more substantial change before it would re-band”? If it is the latter, is there any guidance on how substantial the building works would have to be to qualify?

I hadn’t forgotten the 100% premium which is why I was wondering what the best way forward would be...

Albermarle

I hadn’t forgotten the 100% premium which is why I was wondering what the best way forward would be...
It only applies in some areas, so you need to check the rules of your own local authority.

NewOxfordHistory

Albermarle said:

I hadn’t forgotten the 100% premium which is why I was wondering what the best way forward would be...
It only applies in some areas, so you need to check the rules of your own local authority.

Yes. I have and we are in one. Thank you.

user1977

Bear in mind that the purchase will attract the additional dwelling supplement for SDLT (or equivalent), even if you later merge the two houses together.

Sam_666

Just a thought.
Is primary house with mortgage only on your name?
Then you can buy 2nd house on wife's name and avoid loads of tax bills.

NewOxfordHistory

user1977 said:

Bear in mind that the purchase will attract the additional dwelling supplement for SDLT (or equivalent), even if you later merge the two houses together.

Thanks. Yes. I’ve factored that in and we are in a position to afford it (even if we missed the 31 March SDLT deadline, although it would be nice to meet that!). It’s really a question of whether we can reduce the on-going costs.

Sam_666 said:

Just a thought.
Is primary house with mortgage only on your name?
Then you can buy 2nd house on wife's name and avoid loads of tax bills.

That’s an interesting one. The existing house is in our joint names. My on hesitation is whether we’d pass the primary residence test without one of us moving into a separate bedroom on the new house and using the new kitchen! Since I think a lot of tax is dependent on where you live rather than whose name is on the land registry.

NewOxfordHistory

* my only hesitation

silvercar

Sam_666 said:

Just a thought.
Is primary house with mortgage only on your name?
Then you can buy 2nd house on wife's name and avoid loads of tax bills.

A married couple can only have one principal private residence between them, according to hmrc rules. If OP isn't actually married (or in a CP) then it is a good idea.

user1977

Sam_666 said:

Just a thought.
Is primary house with mortgage only on your name?
Then you can buy 2nd house on wife's name and avoid loads of tax bills.

The mortgage lender will be unhappy about merging two houses unless they're all covered by the same mortgage (they won't want to risk repossessing half a house).