Current property owner and first time buyer - help to buy conflict

[long train commute today so here goes for a long post...]

Goldcrypto wrote: »

The point is many of these posts (only a few have provided useful factual information to the question) are just irrelevant views of people and not helpful. Simply they had a question and best way is to offer a solution. So answers are they can do option A or option B or option C but can not do option D etc Simply outlining the solutions without any background views.

But you already have the basic options, outlined in your earlier paragraph which you called "1. ..." and "2. ..."

Option One is that they pool their resources and just buy a property together. Doing that:

- They won't get the chance to get an equity loan and only buy 80% of the property now and the other 20% later at the future market price - but they probably won't need one, because they have adequate funds to just buy the whole lot on a joint mortgage at whatever ownership split they prefer.

- There will be additional stamp duty to pay because of the involvement of your brother. But that stamp duty is not much in the grand scheme of things because you are talking about an asset that creates significant value for them over time - in saved rent payments for the roof over their heads, and in potential capital gains on an exit a number of years down the road. When you are buying the place, you can simply tell the vendor you don't like the colour of the bathroom, so you want to pay less. Or that you don't have as much money as you really do have, so you want to pay less. When later selling the place, you can simply reject a reasonable offer of 95% of the asking price, and demand at least 98%. Boom, 3%. Of course, you are still worse off than if you had done those skilful negotiations and not had the initial stamp duty. But it is not a big deal, paying a few percent stamp duty on a property purchase and sale which runs for a multi year period and creates value in the tens or hundreds of percent of the original purchase price depending on the time period and market conditions.


Option Two is, girlfriend buys a property for herself NOT jointly with boyfriend.

- Stamp duty is lower and she can use the HTB equity loan if she is feeling more financially stretched and wants a new build.

- And then if boyfriend wants to buy in at a later point he can buy a piece off her at market value (at the same time as the equity loan is cleared at that market value), paying his stamp and additional stamp (because of becoming a second property owner), together with the legal fees for the equity transfer and getting the mortgage company to agree to have him on the mortgage etc.


So you have your two main options. And it's been explained that it's impractical to lend her his money as part of her deposit and then live in the property while her mortgage company turns a blind eye. They won't like loaned deposits, and they won't like economic interests for an adult individual who's living there and isn't on the mortgage or the deeds. So the only way to 'help her out' is to gift her some money and have no claim to it.

The overall outcome of just gifting her some money and having her owe him some favour in return - while he has no actual claim to the house, because he will have documented for the mortgage lender that he has no financial interest because it was a gift - is that stamp duty is saved, HTB equity loan is accessible, and she doesn't have to commit as much of her own resources and can keep hold of her savings and investments etc rather than cashing them in. While that would be a very nice gesture by your brother, you have said yourself that 'Lets not forget this couple are not married and who knows if will marry or what future relationship holds'. So, a huge cash gift to help her buy the property with fewer resources of her own is something that could backfire spectacularly and probably shouldn't be considered.

If you try to document the brother's cash as being something properly recoverable, your options are very limited because of the mortgage lender not liking it. Theoretically he could inject the money as a loan shortly after she purchases it, taking a second charge on the house which ranks after the mortgage loan and allows her to pay down the mortgage to a level which is more acceptable to her. But charging the house (when it is not all her house anyway, because of the HTB equity loan shared ownership scheme) can be problematic and even if he had a charge which says he definitely gets paid on proceeds of sale, what happens when they split up in six months and she doesn't sell her property for thirty years and in the meantime he needs the money to buy a marital home with someone else?

And of course, a loan interest in a house is not what he really wants - the real value of the house over time is in equity ownership ,and ownership comes with stamp duty implications and HTB equity loan implications.


So what it comes down to is she can go it alone and get the tax regime and incentives applicable to someone making their first step onto a property ladder, and she can do that more affordably if he gifts her a load of money that he doesn't want to; OR they can buy like any 'normal' couple and pool their resources and get a joint mortgage for the property they'll jointly own and live in. If they do the joint purchaser thing, there won't be any incentives applicable to buying a first time property as one of the parties is well minted in property having already bought one and seen it go up in value to a multiple of what he paid.

There isn't a simple solution that allows him to be a joint purchaser of equity in the property while getting the various benefits of being a first time buyer who doesn't own any residential property, when he is in fact a person who does own residential property and is not a first time buyer. OR if there is a good solution, it will not be shared for free on a site with ten million viewers, because promoting loopholes is the way loopholes get closed.

If the couple who are looking to do the buying are interested in a better solution, they can do some research and pay for professional advice. If they ask the boyfriend's 'brother' to go online and ask around on forums rather than doing the legwork themselves or buying professional adice, what comes back to them will be cheaper than professional advice but they may get a suboptimal result.

- -

The problem you have with this thread is that effectively you have come to the forum, explained the situation, and said you are looking to find a way that the couple can structure a transaction to try to get the various benefits and incentives (or lack of disincentives) of:
- being a first-time-buying couple (stamp duty discount) and

- being a non-property owning couple (access to HTB equity loan and avoidance of second-property stamp duty surcharge)

while actually they are quite well off and one of them is not a first time buyer and is currently an owner of property.

We *do* get that you want the technical answer to this and don't want to moralise about politics etc. However, I expect you understand as such incentives are funded by *the taxpayers*, which includes nearly all of the forum members here - none of us have a vested interest in helping you structure a transaction to get around the pesky restrictions that the government have decided to impose on the various incentives (or lack of disincentives a the case may be).

So, some people will not want to help and will stay away from the thread, while other people will want to actively participate in the thread to voice their indignation at being asked for suggestions on how to improve the couple's financial result (grabbing incentives for which, on the face of it, the couple do not qualify) at a greater cost to the taxpayer

You can spin it however you want, but you seem to have already concluded that you don't like the standard approach of girlfriend buying a property and getting incentives, because she has to commit more of her resources to it and the boyfriend doesn't get a look in ; and you don't like the other standard approach of them buying as a couple because there are no incentives and there is a positive disincentive (3% additional stamp duty). So it seems like what you want to get as your outcome, is incentives that as standard, you can't have.

No amount of grandstanding about commercial landlords with 15 properties will distract from the fact that you are talking about someone with property wealth wanting to get a government incentive designed to help people who are struggling to 'get on the property ladder'. You must realise that it is going to get people's backs up if you are saying it is not fair that the couple can't use government assistance to help them onto the property ladder, when you have confirmed that the girlfriend can afford to buy this two-person property with just her own salary, savings and investments ; and the boyfriend has owned a London property for so long that it has gone up in value massively together with the tenants paying off his mortgage so that the rental income is 4x the mortgage and it is so lucrative that he definitely won't sell it.

He could move in to it if he needs a roof over his head, so forgive us as taxpayers for not wanting to 'help him get onto the property ladder' and for not wanting to waive the second-property stamp duty premium.

You've tried to deflect the indignation on the thread by appealing to our xenophobia and saying that he is not some overseas investor, and you've tried to appeal to our common decency by mentioning that the couple are both hardworking - and presumably do not need to be ashamed of having savings and investments accumulated over time. But surprise surprise, most of us are not foreign investors either, nor do we have commercial property empires, and we do work damned hard for our own money, such that we don't want to give away our legal advice or tax money for free to 'help them out' in structuring a standard boyfriend-girlfriend property purchase.