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Where Taxpayers and Advisers Meet

1st time buyer buying with a home owner

ben_power
Posts:81
Joined:Tue Feb 27, 2018 8:34 pm
1st time buyer buying with a home owner

Postby ben_power » Tue Feb 27, 2018 8:49 pm

Hi all,

I'm new to this site so apologies if this has already been discussed.

I am a first time buyer and looking to buy with my partner who already owns a property. She currently lets this out and lives with me in rented accommodation. We want to purchase a home together but still benefit from the 1st time buyer Stamp duty reduction. Is there any way to achieve this and if so how?

I am looking to purchase at £450k so as a FTB i would pay £7,500 SDLT. Unfortunately I do not think I can borrow quite enough alone without including my partners income and I assume this would then result in paying normal SDLT at £12,500 or even £26,000 if classed as a second home owner due to my partner.

Can somebody help me as this will significantly effect the plan.

Thanks in advance.

Ben

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm

Re: 1st time buyer buying with a home owner

Postby JOHNRE » Wed Feb 28, 2018 9:04 am

Unfortunately, you will not be able to take advantage of the stamp duty reforms for first-time buyers that were introduced in 2017 since, if there are two purchaser's, BOTH need to be ftbers - see page 4 below.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661728/8274_guidance_note_SDLT_relief_for_first_time_buyers.pdf

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: 1st time buyer buying with a home owner

Postby someone » Wed Feb 28, 2018 1:27 pm

The only way around this (which assumes you aren't married) is for your partner to gift or lend you the missing money (that she might be able to borrow against her existing property)

But you might find that the bank isn't happy about the loan, and your partner might not be willing to gift it to you. If she does give you the money and then you split up, the house would be yours, including the part she helped you to buy.

It *might* be possible for your partner to be on the legal title and mortgage but have no beneficial interest - but I wouldn't be confident that that would survive a challenge.

You'd still own the entire property but the risks are lower for your partner.

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: 1st time buyer buying with a home owner

Postby SDLT Geek » Thu Mar 01, 2018 2:38 pm

someone makes some good points. The type of mortgage referred to is often now called a "joint borrower / sole owner" mortgage. It can be suitable in a few cases, but is unlikely to work well where the non owning party is to put in any capital. It would only work for SDLT if the non owning party is to have no share at all in the property. This is often impractical, but you could consider it, just in case it suits your circumstances for the first time buyer alone to be the owner of the property.

ben_power
Posts:81
Joined:Tue Feb 27, 2018 8:34 pm

Re: 1st time buyer buying with a home owner

Postby ben_power » Thu Mar 01, 2018 11:15 pm

Thanks for your replies.

I'm still a little confused by the SDTL situation though. Could somebody clarify what tax would be due if we bought together? Buying at £450k, would the tax be the standard £12,500 or £26,000 due to my partner already being a home owner? The new purchase would be our main residence.

Thanks.

SDLT Geek
Posts:232
Joined:Sun Apr 30, 2017 5:45 pm

Re: 1st time buyer buying with a home owner

Postby SDLT Geek » Fri Mar 02, 2018 9:10 am

On the face of it the SDLT would be due at higher rates if you buy together, so £26,000.

It is just possible that your partner's property owning history could save the intended purchase from the 3% surcharge. Did she previously own a property which she had lived in and which she has sold/disposed of? That could be anywhere in the world, or at any time (so long as you complete your purchase by 26 November 2018). It would be important though that starting with the date of the sale/disposal she had not acquired another property with the intention of living in it. So you are looking for overlapping property ownerships on her part (or bridging).

someone
Posts:692
Joined:Mon Feb 13, 2017 10:09 am

Re: 1st time buyer buying with a home owner

Postby someone » Fri Mar 02, 2018 9:55 am

One other possibility is for your partner to gift you her other property after purchase of your new home. (I'm assuming it used to be her home in the last three years)

This probably won't be possible if there's a mortgage (and there will be SDLT issues again) and has similar problems if you split up, plus you would then get the rental income instead of her - and no doubt lots of insurances to sort out etc - but theoretically could make you eligible for a refund of the extra 14k.

If it's a small, cheap property with a small mortgage, you might only be looking at say 5k in legal fees plus SDLT to reclaim 14k so might make sense - but you will need professional advice because there are a lot of ways you could end up spending 5k and getting nothing.

ben_power
Posts:81
Joined:Tue Feb 27, 2018 8:34 pm

Re: 1st time buyer buying with a home owner

Postby ben_power » Fri Mar 02, 2018 8:10 pm

Thanks again for the ideas.

In reality, it looks like I'll just buy on my own. Hah.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: 1st time buyer buying with a home owner

Postby maths » Sat Mar 03, 2018 9:47 pm

Where two persons are purchasing a dwelling then first time buyer relief only applies if each such person qualifies as a first time buyer.

You partner owns a property and thus cannot so qualify. This is the case irrespective of her property history (as suggested by SDLT Geek) or any other circumstance.

The intention of the legislation is, of course, to help the literal first time buyer as might be commonly understood.

However, the phrase above "two persons are purchasing a dwelling" tends to implicitly assume (as my comments assume) that each person acquires a beneficial interest in the property acquired.

If therefore the property was purchased jointly (including both on the mortgage deed) but with you possessing 100% of the beneficial interest (partner 0%) first time buyer relief would apply.
Your partner and you would be trustees of a bare trust but only you would have a beneficial interest in the property.

This approach is adopted in the classic case where a child needs a parent to be a joint borrower as the child's income is insufficient alone to obtain a mortgage.

It may be that your partner is not happy to be on the hook for the mortgage if she does not acquire a beneficial interest. One option in this case (would be for you to agree with her to indemnify her against any claim by the mortgagee).
Overall, not necessarily an attractive practical option for her but I believe is SDLT effective.

ben_power
Posts:81
Joined:Tue Feb 27, 2018 8:34 pm

Re: 1st time buyer buying with a home owner

Postby ben_power » Sun Mar 04, 2018 6:38 pm

Thanks you Maths.

Food for thought.


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