Chancellor Philip Hammond recently announced that first time buyers won’t have to pay stamp duty on properties valued up to £300,000, saving an average of £2,000.
However, if a first time buyer receives help from bank of mum and dad, and they are named on the mortgage, they may not be eligible for the tax exemption. The abolishment of stamp duty tax only applies to first time buyers who have never owned a property before, so anyone who buys with a partner or spouse who has previously owned a home, or parents who have their own property, the exemption won’t apply.
If parents own their own home, the new property may also be regarded as a second property, and could be liable for stamp duty at the higher rate of 3%, costing more. This could have an impact on first time buyers who receive help from parents, unless they gift the deposit without being named on the mortgage. Adding parents to the mortgage will help to increase the amount which can be borrowed for a property.
However, applying for a mortgage called “joint mortgage sole proprietor” will enable first time buyers to receive support from parents, while also benefiting from the stamp duty exemption. The parents won’t appear on the title deeds, so the property won’t be liable to the second charge tax.
New regulations can make the house buying process even more complex, which is why mortgage advisors invest so much time on a CeMAP training course. This ensures they have all the current and accurate information to help buyers find the best deal.