9 March 2018 by

More help for First Time buyers and the “Bank of Mum and Dad”

For years millennials, or “generation rent” as they’ve come to be known, have been told that joining the elusive club of property owners is nothing but a pipe dream. Owning a home is an aspiration for millions of people in the UK and the government have committed themselves to helping those people achieve that aspiration.

Finally this seems to be working – with the number of first time buyers hitting a ten year high. This is despite the average deposit growing by a staggering 91% over the same period. In a recent report, the Halifax said that the number of people taking their first step on the property ladder had almost returned to those levels last seen in 2007 before the financial crisis. First time buyers now account for half of all house purchases with a mortgage.

This can be attributed not only to higher employment levels, lower interest rates and more competitive mortgages, but also the government’s Help to Buy Scheme and the Stamp Duty Land Tax (SDLT) relief for first time buyers introduced in November 2017. The Help to Buy London Scheme applies to new build properties in the capital worth up to £600,000 and the relief applies to the SDLT payable on the first £300,000 on all properties nationwide, worth up to £500,000.

Despite all of the above, with the average house price now being 7.6 times the average annual salary, first time buyers still often require financial help from a parent or a family member. Many are not aware that using the “Bank of Mum and Dad” can leave mum and dad having to pay Capital Gains Tax (CGT) and in most cases the purchase will attract the SDLT surcharge that was introduced for those purchasing additional residential properties.

A way to possibly avoid this additional tax liability comes from a little known mortgage product, which if it is more widely known about, could further boost first time buyer numbers. The “Joint Borrower, Sole Proprietor Mortgage” requires a joint application and takes into account the incomes of both the first time buyer and the family member. However, only the first time buyer will be registered as the owner, mitigating any CGT issues for the family member and allowing the first time buyers to escape the surcharge trap and take advantage of the first time buyer relief.

If you want to find out more about the options available to help you or your children get onto the property ladder please contact one of our solicitors in the Residential Property team here.

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