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Goldcrypto
Posts: 104 Forumite
My brother bought his first property in his 20's in London and now in 30's. This was bought as an investment as a buy to let property. Now he has never had a property of his own as a residential to live as he preferred renting (the property investment helped him gain good capital growth over the last 10 years and the rental paid down mortgage and covered most of his rental costs for his own living) as he liked be flexible to be able to choose new properties and move around with his work that has quite a bit of international travel.
Now the 20% loan assistance for first time buyers would not be available to (despite him not actually having a home to live as his main residency) as he would still be classed as someone owning real estate plus he would be hit by the new increased stamp duty costs for a second plus property etc - all seems unfair as those companies with 10+ do not get hit (ie big investors), while the small guy gets hit and plus some people do not like to invest their money in stock market etc, would be fairer if government allowed 1 residential as main residence and at least 1 investment buy-to-let (for those also to be able to claim first time buyer assistance and not have to pay increased stamp duty costs).
My question (given the background): His girlfriend would qualify for the first time buyer and would want the 20% loan available for first time buyers. Now for land registry when she buys the name would have to be in her name etc but if my brother wanted to give her 50% of down payment and gift her for time been half of the mortgage payments so in x number of years there could be a legal contract she signs (at purchase) that states he has half ownership claim etc? Is there a way to structure this with a lawyer in some way?
He would not be willing to sell the London property as growth has been too good and expects continued strong capital growth. Even if that was not the case, it is in a very hot rental location so provides great rental income.
Now the 20% loan assistance for first time buyers would not be available to (despite him not actually having a home to live as his main residency) as he would still be classed as someone owning real estate plus he would be hit by the new increased stamp duty costs for a second plus property etc - all seems unfair as those companies with 10+ do not get hit (ie big investors), while the small guy gets hit and plus some people do not like to invest their money in stock market etc, would be fairer if government allowed 1 residential as main residence and at least 1 investment buy-to-let (for those also to be able to claim first time buyer assistance and not have to pay increased stamp duty costs).
My question (given the background): His girlfriend would qualify for the first time buyer and would want the 20% loan available for first time buyers. Now for land registry when she buys the name would have to be in her name etc but if my brother wanted to give her 50% of down payment and gift her for time been half of the mortgage payments so in x number of years there could be a legal contract she signs (at purchase) that states he has half ownership claim etc? Is there a way to structure this with a lawyer in some way?
He would not be willing to sell the London property as growth has been too good and expects continued strong capital growth. Even if that was not the case, it is in a very hot rental location so provides great rental income.
'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
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can't see anyway he can use the help to buy, have his name on it and avoid the 2nd stamp duty. he could take out a loan agreement with the gf for the deposit he is providing, but the property will always be in her name with no legal right, unless they go married for 5-10Yrs plus even then she would probably keep it!
london property market is stalling, his rental might not be as certain to rise as you may think0 -
Goldcrypto wrote: »My brother bought his first property in his 20's in London and now in 30's. This was bought as an investment as a buy to let property. Now he has never had a property of his own as a residential to live as he preferred renting (the property investment helped him gain good capital growth over the last 10 years and the rental paid down mortgage and covered most of his rental costs for his own living) as he liked be flexible to be able to choose new properties and move around with his work that has quite a bit of international travel.
Now the 20% loan assistance for first time buyers would not be available to (despite him not actually having a home to live as his main residency) as he would still be classed as someone owning real estate plus he would be hit by the new increased stamp duty costs for a second plus property etc - all seems unfair as those companies with 10+ do not get hit (ie big investors), while the small guy gets hit and plus some people do not like to invest their money in stock market etc, would be fairer if government allowed 1 residential as main residence and at least 1 investment buy-to-let (for those also to be able to claim first time buyer assistance and not have to pay increased stamp duty costs).
My question (given the background): His girlfriend would qualify for the first time buyer and would want the 20% loan available for first time buyers. Now for land registry when she buys the name would have to be in her name etc but if my brother wanted to give her 50% of down payment and gift her for time been half of the mortgage payments so in x number of years there could be a legal contract she signs (at purchase) that states he has half ownership claim etc? Is there a way to structure this with a lawyer in some way?
He would not be willing to sell the London property as growth has been too good and expects continued strong capital growth. Even if that was not the case, it is in a very hot rental location so provides great rental income.
Is this a joke??0 -
This is not the best place to ask for advice on tax avoidance. Whether or not you think it is unfair is irrelevant, though for what it is worth, your brother does not sound like the type of person FTB stamp duty relief was designed to help.
There could very well be some legal way of getting around paying what he would otherwise owe, but for that sort of legal advice he would be charged handsomely by a lawyer! May as well just pay the additional SDLT and save himself the hassle.
This is not just a question based on legal tax advice to reduce stamp duty. That is just one element in the process as she wants to take advantage of her 20% first time buyer government assistance loan that each first time buyer can potentially get. If he bought himself few years ago there were no second property additional SDLT - that is irrelevant here just an observation. Also irrelevant who it is aimed at but who is eligible to apply.
He has the funds to give the deposit and help with 50-50 mortgage contribution so would be looking for a split at some stage of the property. ie half ownership at some stage. Obviously she becomes the initial owner on the land registry from the start.
By not doing the 20% additional first time buyer assistance she looses potential options in the properties she can purchase - quite substantial. Hence, the reason for applying for it!
My question is really aimed at successful property investors here that must have had similar scenarios. So I would like to hear from them.
cashbackproblems wrote: »can't see anyway he can use the help to buy, have his name on it and avoid the 2nd stamp duty. he could take out a loan agreement with the gf for the deposit he is providing, but the property will always be in her name with no legal right, unless they go married for 5-10Yrs plus even then she would probably keep it!
london property market is stalling, his rental might not be as certain to rise as you may think
He is not looking to have his name on the purchase as he is not a first time buyer so would not qualify. There are options if he sold his first property and then he would not pay additional SDLT plus options for assistance on purchase. That is not an option he wants to do!
There is no guarantee of marriage down the line or whatever so needs to be looked at purely as an investment option that has some legal structure so at some stage he has opportunity to own half.
He has no concern if London rental stalled for 5 years+ ! The rental is already 4 times the mortgage. We would have to see rental rates fall approx 75% in London for him still to break even on mortgage. He would still then benefit from continued capital growth. This is a long term investment (he is only early 30's) so he would be silly to liquidate. Many hotspot locations in London rent immediately as the demand is so strong. Given London's population growth, add lack of housing and still need to build substantially more properties, then I see little chance of him ever having issues renting. Historically, London real estate cap growth and rental growth has always grown over 10-20 years. Any London real estate consultancy would not bet against that.'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
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PersianCatLady wrote: »Is this a joke??
Sorry, how so?'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
W Buffett0 -
Goldcrypto wrote: »Sorry, how so?
Read your own OP again and see just how funny it is that you think that your brother is so hard done by because he cannot get the benefits of being a first time buyer because he already owns a property.
Honestly, I haven't had such a good laugh in ages
Thanks for that!!0 -
PersianCatLady wrote: »Read your own OP again and see just how funny it is that you think that your brother is so hard done by because he cannot get the benefits of being a first time buyer because he already owns a property.
Honestly, I haven't had such a good laugh in ages
Thanks for that!!
Glad you enjoyed, but are you a real estate lawyer or successful real estate investor that has input to the actual question?
Regarding my views, they are irrelevant as the current legislation is in place - these do change so will see what happens in the future. Also, my view on this issue about property investment and implications for SDLT and help to buy are not solely focused on him but should apply to every UK citizen. I personally feel they should have the opportunity (if they are in the position to do so) to be able to get assistance on first residence property and not have additional SDLT on second property purchase (as an investment). Not everyone wants to invest the majority in the stock market with main investments etc. Maybe you think it would be fair if he (or similar people) had a few million and had 10+ properties then he could set up a company for the properties and not have to pay additional SDLT and have access to superior lending options? The government seems to be squeezing the small investor and giving advantage to the big players. Personally, I do not think it is fair for the average hard working British Joe just trying to progress.
Regardless of peoples current political views on UK real estate policies, I'm here looking for actual technical answers to address the question only. So lets not digress.'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
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Which HTB scheme are you referring to? Help to Buy Equity Loan or a Help to Buy ISA/Lifetime ISA because you and your brother seem confused about both.
The Help to Buy Equity Loan isn't just for first time buyers. Anyone can take advantage of the scheme providing you they don't own any other properties which is why your brother is excluded from using it.
The Help to Buy ISA/LISA bonus is available to any FTB and they still qualify for the bonus even if they jointly purchase a property with a non FTB.
You also seem to be confused about what "gift" means. Your brother can't simultaneously gift money to his girlfriend and claim a beneficial interest in the property. It's one or the other. The girlfriend will have a very hard if not impossible time finding a mortgage lender willing to grant a mortgage using a deposit gifted from someone who will live in the property but not be named on the mortgage, or a borrowed deposit, especially if it HTB EL she wants to use, and good luck finding a solicitor who will draw up a Deed of Trust under the proposed terms because it would probably involve mortgage fraud and almost certainly tax evasion (not avoidance which is perfectly legal).
It boils down to your brother not being able to have his cake and eat it.0 -
Which HTB scheme are you referring to? Help to Buy Equity Loan or a Help to Buy ISA/Lifetime ISA because you and your brother seem confused about both.
The Help to Buy Equity Loan isn't just for first time buyers. Anyone can take advantage of the scheme providing you they don't own any other properties which is why your brother is excluded from using it.
The Help to Buy ISA/LISA bonus is available to any FTB and they still qualify for the bonus even if they jointly purchase a property with a non FTB.
You also seem to be confused about what "gift" means. Your brother can't simultaneously gift money to his girlfriend and claim a beneficial interest in the property. It's one or the other. The girlfriend will have a very hard if not impossible time finding a mortgage lender willing to grant a mortgage using a deposit gifted from someone who will live in the property but not be named on the mortgage, or a borrowed deposit, especially if it HTB EL she wants to use, and good luck finding a solicitor who will draw up a Deed of Trust under the proposed terms because it would probably involve mortgage fraud and almost certainly tax evasion (not avoidance which is perfectly legal).
It boils down to your brother not being able to have his cake and eat it.
Yes, there is no confusion, I should have stated to be clear is the Help to Buy Equity Loan (that never existed when my brother bought his first property after working many extra overtime hours to save quickly). They have their own individual ISA's that they invest in funds/ETF's etc so nothing to do with the Help to Buy ISA.
The word 'gift' is probably the wrong term of wording I wanted to use. Simply she has the savings and approval of the mortgage amount she would need for the down payment and the ability to cover the mortgage herself. So all in her own name on land registry and no need for my brother in the process. So all under the current legal fame work. They certainly have no intention to make a mistake around that.
However, the simple fact is 1. She wants to be a property owner for her main residence but equally would prefer not putting so much equity in and reducing her mortgage amount at 50% (given brothers contribution) so she could have this capital just as a reserve and top up her max contribution to her ISA for next few years - giving her more liquidity. 2. My brother wants to buy into property for his residence.
Two solutions I was thinking about after do some reading. A) They just buy the property together (forget the 20% assistance for her) as he could take some equity release out by remortgaging his London property then they could just end up with a different equity ownership (say 60% him and 40% her or whatever) They have plenty of time so could just sit until making a good offer and off set the SDLT by a reduced property price (the market they are looking into moving is stagnant, so I believe they can make good offers anyway).
She buys herself as sole owner with 20% HTB Loan and she pays her own mortgage etc. However, then possibility later on of selling 50% ownership of property to him? Ie they would then need to pay the additional SDLT as he would be joining the title and I guess have to pay off the HTB Loan? Could this be done? Are there any conditions for early repayment of HTB loan etc? 'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
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Goldcrypto wrote: »Yes, there is no confusion, I should have stated to be clear is the Help to Buy Equity Loan (that never existed when my brother bought his first property after working many, extra, overtime work hours to save quickly). They have have their own individual ISA's that they invest in funds/ETF's etc so nothing to do with the Help to Buy ISA.
If you think HTB EL is exclusively for FTB then you are confused about the scheme. Is it a new build property they specifically want to buy?Goldcrypto wrote: »The word 'gift' is probably the wrong term of wording I wanted to use. Simply she has the savings and approval of the mortgage amount she would need for the down payment and the ability to cover the mortgage herself. So all in her own name on land registry and no need for my brother in the process. So all under the current legal fame work. They certainly have no intention to make a mistake around that.
However, the simple fact is 1. She wants to be a property owner for her main residence but equally would prefer not putting so much equity in and reducing her mortgage amount at 50% (given brothers contribution) so she could have this capital just as a reserve and top up her max contribution to her ISA for next few years - giving her more liquidity. 2. My brother wants to buy into property for his residence.
There are different types of property ownership. Legal ownership and beneficial ownership. What is being proposed is that she is the sole legal owner whilst they are both joint beneficial owners.Goldcrypto wrote: »Two solutions I was thinking about after do some reading. A) They just buy the property together (forget the 20% assistance for her) as he could take some equity release out by remortgaging his London property then they could just end up with a different equity ownership (say 60% him and 40% her or whatever) They have plenty of time so could just sit until making a good offer and off set the SDLT by a reduced property price (the market they are looking into moving is stagnant, so I believe they can make good offers anyway).
It sounds like option A involves jointly buying the property as tenants in common without using HTB EL and sucking up the higher rate of SDLT which is definitely a viable option.Goldcrypto wrote: » She buys herself as sole owner with 20% HTB Loan and she pays her own mortgage etc. However, then possibility later on of selling 50% ownership of property to him? Ie they would then need to pay the additional SDLT as he would be joinging the title and I guess have to pay off the HTB Loan? Could this be done? Are there any conditions for early repayment of HTB loan etc?
Yes the HTB EL would have to be paid off and he would still attract the higher rate of SDLT assuming the goverment hasn't changed the legislation again at that point.0 -
If you think HTB EL is exclusively for FTB then you are confused about the scheme. Is it a new build property they specifically want to buy?
I meant to imply a new property owner - not necessarily 'first' time but not owning any other properties at time of the purchase. She would be flexible at looking at whatever properties and threshold (up to max value - looking to get most they can spend outside of London) is applied to the HTB EL to qualify for it - if she went that route.Yes the HTB EL would have to be paid off and he would still attract the higher rate of SDLT assuming the goverment hasn't changed the legislation again at that point.
Thanks. Are you aware of any restrictions to that or requirements to time needed to be owned before she could sell 50% ownership to him?'Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway'
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