Background:
Our clients, recently embarked on the exciting journey of purchasing a new property in London. With a property value of £725,000, they sought to secure a 90% Loan-to-Value (LTV) mortgage to make their dream home a reality. The client owned one property already which had a residential mortgage.
Client Details:
- Property Value: £725,000
- LTV: 90%
- Property Type: Residential
- Primary Applicant: Previously owned a property which is currently rented to a friend.
Challenges:
- Stamp Duty Surcharge: As one applicant already owns a property, they were subject to the additional 3% Stamp Duty surcharge on their new purchase.
- Rental Property: The existing property being informally rented out added an additional layer of complexity to the mortgage application.
Solution:
- Mortgage Arrangement: We worked closely with the clients to arrange a mortgage that covered 90% of the property’s value, equating to £652,500. This enabled them to make their purchase with a manageable deposit of £72,500. The loan was underwritten as a second-home mortgage as the existing property was under a residential, not Buy to Let loan
- Stamp Duty Advice: Understanding the financial impact of the Stamp Duty surcharge, we provided guidance on the possibility of reclaiming the additional 3% surcharge. By selling the background property within 36 months, the clients could be eligible for a reimbursement, significantly reducing their overall costs. We also explored options of Joint-Borrower-Sole-proprietor, which would allow the client to complete their purchase without incurring the stamp duty surcharge
Outcome:
- Successful Purchase: The couple successfully purchased their new London property with the desired mortgage.
- Stamp Duty Reimbursement Potential: They were well-informed about the steps required to reclaim the Stamp Duty surcharge, positioning them to optimise their financial situation once the background property is sold. It is important to always seek professional advice with relation to tax and reclaiming any amount owed.
Conclusion:
Through careful planning and tailored advice, our clients navigated the complexities of purchasing a property with an existing rental property and potential Stamp Duty implications. Their successful property purchase in London stands as a testament to the effectiveness of our comprehensive support and expertise.