Moving in or BTL?

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    Moving in or BTL?

    Hello,
    My partner and I are trying to figure out the best way to optimize the following situation.

    In 2009 I bought a two bedroom flat (cash) and I have been living in it since.

    In 2017 my partner moved in with me and now he is thinking about buying a property (he is a first time buyer and circa 75% of the property value to be covered by a mortgage).

    Now, if he is to let his place out he will need to pay:
    - a higher stamp duty,
    - a higher interest rate on the mortgage,
    - 40% on the let to buy income.
    This means, very roughly, that the rent will cover around 60-65% of the mortgage.

    On the other side, if we decide to rent out my place and move to his then he will pay:
    - a lower stamp duty,
    - a lower interest on the mortgage,
    - fully pay for his mortgage with no help from renting it out.
    But, in this case, I will need to pay capital gains tax on my property if I ever decide to sell.

    We are not married or in a civil partnership and prefer to keep our finances separated in terms of properties.

    Any thoughts on how to best handle this? We are struggling to find a sweet spot.

    Every idea/thoughts is very much appreciated.

    Thanks

    #2
    1. First time buyers do not pay stamp duty on residential property purchase priced below £300,000 but do pay normal stamp duty on the entire price if the sale price is above £300,000. The £300K figure may be higher in London

    2. For higher income persons on 40% tax rate, the changes to tax allowances for BTL property do not make investing sense and many BTL investor are expected to exit during the next 2 years.

    3. If the rent income only covers 60-65% of the mortgage payment , the other one third of mortgage payment must be paid from partner's own pocket . The loan does not make investment sense for the mortgage lender's criteria.

    The Mortgage Lender's criteria requires the "monthly rent" to exceed the 1.3 - 1.5 x the monthly mortgage payment .

    Comment


      #3
      Gordon999,
      thanks for it.

      Yes I have realized we made a mistake in assessing the stamp duty payment.

      As far as your points 2 and 3, would you have any article/publication/online calculator we can read/use to understand about the topic/figures a little bit more?

      We are trying to reach the optimum solution but it seems that, at the end of the day, one of us will need to pay CGT on the property unless we decide to live separately.

      Thanks again.

      Comment


        #4
        Originally posted by paduk View Post
        We are trying to reach the optimum solution but it seems that, at the end of the day, one of us will need to pay CGT on the property unless we decide to live separately.
        The only alternatives to that require a change in your relationship via a trust, partnership or limited company.
        Two people in two properties with one let will, otherwise, inevitably incur CGT while let.

        It won't be possible to get a BTL mortgage where the rent covers less than the mortgage, so that's a non-starter - which, in this case, is helpful for guiding your decision.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          If you have decided to keep property under separate ownership , then your problem becomes "buying under partner's sole name or company name" and some discussion is covered by these websites :

          https://www.propertygeek.net/article...ugh-a-company/

          https://www.mortgagesforbusiness.co....-let-property/

          https://homelet.co.uk/landlord-insur...-for-landlords

          Comment

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