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Stamp Duty - Parents House

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  • Stamp Duty - Parents House

    We are looking to buy my Mother in laws house (family home).

    It was valued last year at 300k but after online and local research I would say more realistically 270K.

    The house was mortgage free. The idea was eventually the property would be sold and split 3 ways for inheritance to my partner and my sister in law.

    The mother in law withdraw 70k of equity on the property 16 months ago and bought another property that she now lives in.

    The family home is now being lived in by my sister in law (who eventually will inhert, she pays rent to the MIL which pays for the 70k outstanding.

    The idea was the house would now eventually be split like this

    If valued at 270k

    My partner -100k
    Sister in law - 100k
    Mother in law 70k

    The MIL suggested an idea that my partner & I buy the house and use the 100k equity as our deposit for 170k mortgage, give 100k to the sister and 70k to the MIL so we can buy the house outright.

    This gives the sister 100k to have a deposit and to get on the property market. (Sister has no interest of buying the family home)

    Then the mother 70k to pay of her mortgage

    We have to pay £8k+ for stamp duty if we buy the house.

    Is there anyway of not paying that or the mother in law to transfer the house over to us to avoid this or maybe something else??

    Can the MIL value the property at 249.999 and if so how much of an effect will this have.

    From researching online, there is now way we can do this. I thought I would ask you though just to confirm.

    Any help regarding this??

  • #2
    Re: Stamp Duty - Parents House

    If your partner is entitled to £100K of the house then you should only be paying £170K for it. You need to be upfront with mortgage lenders and explain that house is worth £270K so why can't they lend you £170K on a house worth £270K even though you are only paying £170K for it as they will have a security which they can realise for £270K?

    This is very important - don't let financial advisers complicate the issue - with imaginary deposits etc - the fact is you only want to pay £170k for the house and that's what it is worth because your partner already "owns" £100K of it. Therefore you should only have to pay £1700 SDLT because that is what you are actually paying.

    SDLT is based on the price actually paid and questions of market values only come in when there is some obvious fiction created to disguise the real nature of the transaction. If MIL owned it outright and want to sell it to you for only £250K then if that's all you paid the SDLT would only be £2500. There could be other implications - but not for SDLT.
    RICHARD WEBSTERwww.rwco.co.uk
    As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.


    • #3
      Re: Stamp Duty - Parents House

      This is what Im concerned about.

      Some people have been telling me that when I apply for my mortgage the house will be valued at say 270k. I will get a mortgage for 170k.

      The stamp duty will be charged according to the house value.

      What your telling me is promising.

      The only part that concerns me is the
      your partner already "owns" £100K of it
      . I believe it is in the MIL's will but, to mortgage lenders what proof are they going to need that she "owns" the 100k of it.

      I can't get my head round it.


      • #4
        Re: Stamp Duty - Parents House

        If MIL chooses to transfer for £170K that is a matter for her and only £1700 SDLT is payable.

        Some mortgage lenders/brokers can't understand that there is a distinction between price and value. They worry that they can't lend 100% of price, forgetting that if they had to repossess and sell they would have £270K's worth of property.

        Therefore they come up with all kinds of clever stuff about you paying £270K and having part of the price gifted - which is silly because then you might have to pay £8100 SDLT.

        Usually if the property was being sold to strangers the price actually being paid would be strong evidence of value for lenders, but in this case MIL can choose to make a premature gift of his share in the property and so they have to get a valuer to be more careful and tell what he thinks it is really worth. If he says £270K then they are only lending 170/270 = 62.96% so what's their problem? So you simply tell the lender the truth and I can't see why they can't lend you £170K on a house being transferred to you for £170K.

        If the price on the documents is £170K and that is what you are actually paying then you only pay SDLT on that. Period. End.

        MIL may have problems later with social services saying she made a gift of part of the value to avoid paying for care etc...but that's a different issue.
        RICHARD WEBSTERwww.rwco.co.uk
        As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.