You have decided to take the leap and move in together. By now, you’ve probably realised that there’s a lot more to it than just moving your belongings into a new house. Buying a home is an exciting time but it can be overwhelming, especially if you’re a first-time buyer. Here are some things to consider to help you on your way:
First time buyer?
If you have never owned an interest in a residential property in the UK (or anywhere else in the world) and you intend to occupy the property as your main residence then you should qualify for relief and pay no Stamp Duty Land Tax (SDLT). However, the purchase price must be for £300,000 or less. If you pay between £300,000 and £500,000 for your property you will pay) SDLT of 5% on the amount of the purchase price in excess of £300,000. If you purchase for more than £500,000 you will not be entitled to any relief and will pay SDLT at the normal rates.
Already own a property?
In this case (whether it is in your own name or joint names or even if beneficially entitled under a trust, for example) and you are keeping the property, a 3% SDLT surcharge is applied on the total price paid for the property. If you own any other property, higher rates will apply.
Replacing your main residence?
If you own a second home or a buy-to-let, the surcharge is not payable provided you sell that property within three years of buying your new property. If you complete before the sale of your existing property you will still have to pay the surcharge but you can reclaim it, as long as the existing property is sold within the three year period.
Thought about mortgages?
The ‘Bank of Mum and Dad’ – a gift or loan from parents – is prevalent now in many property purchases. However, many lenders will not offer on this basis and will not proceed. Some lenders proceed on the basis that a letter or form is provided stating that the parents will have no legal or beneficial interest in the property (which could potentially affect the lender’s security). Ensure your lender is comfortable with how the deposit is being funded from the outset to avoid any delays or – worse still – a mortgage withdrawal down the line.
Co-ownership – what are the legalities?
Ensure your instructions are taken early on with respect to how you wish the property to be held if you are buying jointly. The implications between holding the property as joint tenants or tenants in common should be explained to you and recorded accordingly.
As joint tenants, you have equal rights to the property, the property automatically goes to the other owners if were to pass away and you cannot pass on your ownership in your will. As tenants in common you can own different shares, the property does not automatically go to the owners if you should pass away and you can pass your share on the property in your will.
Know about Declarations of Trust?
This is a legally binding document that records the financial arrangements between joint owners of a property. If you were to later fall out, this type of trust deed can cover the amount paid by each party towards the deposit, a list of fixtures/fittings ownership, contribution to outgoings, costs, mortgage repayments, agreement of value on a sale and right of first refusal. Setting out these financial arrangements from the outset can hopefully provide clarify and reduce the possibility of any disagreements in the future.