We get that First-Time Buyers often struggle to get onto the property ladder. For those trying to buy their first home on their own, it can be even more difficult. Saving the deposit, securing the mortgage, solicitors fees and budgeting for Stamp Duty? The costs keep adding up in a relentless spiral.
But borrowers got a hand up from an unexpected source in 2017. In the Autumn Budget, The Government introduced Stamp Duty relief for first-time buyers. Here’s how it works:
First time buyers purchasing their first home for £300,000 or less will pay no SDLT. Where the purchase price is over £300,000 but does not exceed £500,000 they will pay 5% on the amount above £300,000.
Here are two clever, but legitimate routes to claiming First-Time Buyer Stamp Duty relief. It’s perfect for borrowers who plan to use the bank of mom and dad, but don’t want to pay Stamp Duty. It can even work for couples where one of the two has bought a house before. But first…
a person buying a house or flat who has not previously owned a home and therefore has no property to sell.
Given that description, how can your family or a partner who’s owned a home before count? Because they’ve been on a mortgage deed before, doesn’t that exclude them (and you)? Not necessarily.
If they go on the deed to your new home, then yes: it can nullify your claim. But if they are on a joint mortgage with you and not the Deeds, that’s fine. The key, then, is to find the right mortgage and a broker who understands your intent.
Finding a mortgage broker who knows lenders who can accommodate you is invaluable. For our scenario, they should be guiding you to a Joint Borrower, Sole Proprietor mortgage.
Several lenders offer them, and as a mainstream mortgage. But, for whatever reason, they’re still under the radar. That said, many familiar, reputable banks offer variations thereof, including:
Imagine you’re a first-time buyer and your dad is going to help you buy your first home. Together, you go to see your broker.
They tell you that, as it’s to be your home, you will be the first applicant, your dad the second. You’ll then both need to supply any relevant information the provider asks for. Yes, they have to assess your affordability the same as they would any mortgage applicant. No difference there.
The lender will then take both incomes into account. Your dad must first declare that he already has a mortgaged property. Then, he must confirm he has no intention of living in this new home. With that, they can use his income in the affordability assessment process. But the big difference will be that his name won’t appear on the property’s Deeds.
So as far as it concerns HMRC, your dad still only owns one home. Likewise, you also own one home, the one you’re buying as your first home.
This route entitles you to the SDLT exemptions up to the threshold of £300,000. It is also 100% legal, and acceptable to HMRC.
Both parties will remain jointly and severally liable for the debt to the bank. So, if you can’t make your monthly mortgage payment, your dad will have to. That’s irrespective of the fact his name isn’t on the Deeds; his name is on the loan.
The same owner/proprietor mortgage set up can also work for some couples buying a home together.
Imagine one half of the couple already owns a property; the other is a First-Time Buyer. The broker will find the couple the right mortgage and respective lender. Then they’ll oversee registering the new property to the First-Time Buyer on the Deeds. The existing homeowner’s name will appear nowhere on those deeds.
Again, both parties will be on the mortgage and liable for it. But, as long as the existing property owner isn’t on the deeds, they will be exempt from Stamp Duty surcharge.
Incentives, like Stamp Duty exemption, have a positive effect on the housing market. In a market where demand drives costs higher all the time, they’re a welcome relief. And for those who missed out on the Stamp Duty holiday, it may offer much-needed comfort.
Good brokers always look to find specialist mortgage solutions to keep costs down. Such is the case with Joint Ownership, Sole Proprietor mortgages. For us, at least, Stamp Duty shouldn’t stand in the way of you putting your own stamp on your first home.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.