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Where Taxpayers and Advisers Meet

Plan to get son on property ladder - will it work?

anjo56
Posts: 25
Joined: Wed Nov 29, 2017 8:27 pm

Plan to get son on property ladder - will it work?

Postby anjo56 » Thu Jan 25, 2018 9:44 am

Hi
We are considering purchasing a BTL with our son to get him on the property ladder, with a joint mortgage (mum,dad and son) of £210k where son’s “share” of the mortgage will be under £40k. The £140k deposit will be a gift without reservation from parents.

Apart from mortgage payments, when we retirewe would like to use a pension lump sum to substantially clear a lump of the mortgage. Assuming we survive the 7 years from that date, will all the mortgage payments made by us, and the lump sum still be a gift without reservation? is it sensible to name him on the mortgage and property deeds.? When we “retreat” from contributing, the hope is he will have established a mortgage track record in his own right which would facilitate further borrowing.

In the future, should he sell up and buy another property, is it correct that if he has had a mortgage of under £40k that he would not be subject to 3% SDLT on the second purchase? If so, would that have to be a separate mortgage in his own right or do we have to demonstrate that his share was below the £40k threshold?
Is this workable? Your thoughts and expertise much appreciated!

AGoodman
Posts: 1056
Joined: Fri May 16, 2014 3:47 pm

Re: Plan to get son on property ladder - will it work?

Postby AGoodman » Fri Jan 26, 2018 1:28 pm

The test isn't on the mortgage, it is the gross value of his interest in the BTL property.

If the current value of the BTL property is £350k, he can hold up to 11.4% but bear in mind the value of the property could increase - if it grew to £401k, even a 10% interest would take him over the threshold at the time he bought his own home.

anjo56
Posts: 25
Joined: Wed Nov 29, 2017 8:27 pm

Re: Plan to get son on property ladder - will it work?

Postby anjo56 » Fri Jan 26, 2018 4:42 pm

Thank you very much. Good to know!

anjo56
Posts: 25
Joined: Wed Nov 29, 2017 8:27 pm

Re: Plan to get son on property ladder - will it work?

Postby anjo56 » Fri Jan 26, 2018 9:08 pm

Hello again AGoodman
Have looked at your reply more closely and realise I might not fully understand - sorry this is all new to me.
So, how does the trigger work - is it £40k as an absolute amount or a % of the property value? I think at the end of the day, it is preferable to get him on the property ladder now and for him to understand the possible tax consequences later and legislate for that. Would that be right?
Thank you.

bd6759
Posts: 3195
Joined: Sat Feb 01, 2014 3:26 pm

Re: Plan to get son on property ladder - will it work?

Postby bd6759 » Fri Jan 26, 2018 10:15 pm

If you son owns an interest in a property, and that interest is worth more than £40K, he will be liable to the extra 3% if he buys an additional property.

Your comments about gifts without reservation of benefit are misguided. If you own the house, you have resrved a benefit.

Why not just help him buy a house to live in?

anjo56
Posts: 25
Joined: Wed Nov 29, 2017 8:27 pm

Re: Plan to get son on property ladder - will it work?

Postby anjo56 » Sat Jan 27, 2018 9:32 am

Thanks for pointing out my misunderstanding - very helpful as we are in uncharted waters here.
Ultimately, we are trying to get a place for him to live in. We can't capital-raise enough to buy a place for him but could sustain an interest-only mortgage, with a lump sum to reduce the loan when we retire, hence the BTL route. The place would be let and he would stay at home until he finishes college. He is changing career so can't fund a mortgage alone. I see now that joint ownership is a reservation but I guess my assumption was that if we co-fund the mortgage then we would have to be named on the deeds. Am I wrong again? Thanks.


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