Stamp out uncertainty
FIVE-MINUTE GUIDE TO... FIRST-TIME BUYER’S EXEMPTION
FIRST-TIME buyers are back, helped by cheap mortgages and a special stamp duty exemption, but not every young purchaser is feeling the benefit.
The first-time buyer stamp duty exemption can save them up to £5,000, but many who thought they were eligible have been shocked to find themselves rejected.
If a younger family member is looking to buy a property, make sure they understand the rules or they could be in for a nasty surprise.
THE FIRST TIME
Stamp duty is the bane of every home buyer, but first-timers are exempt on properties up to £300,000.
They can buy up to £500,000, paying stamp duty on the amount above £300,000. Properties above £500,000 attract stamp duty on the full price.
Simon Nosworthy, head of residential conveyancing at Osbornes Law, has seen growing numbers fall foul of the rules: “This can come as a rude awakening, with some deals even collapsing as a result.”
To qualify, you must never have owned, or had an interest in a residential property in the UK or overseas.
Nosworthy says couples often come unstuck when buying together: “Many wrongly assume that only one of them needs to be a first-time buyer, but if the other has owned a property or part of one in the past, the exemption does not apply.”
Couples can get round this by only putting the eligible buyer on the deeds, but this leaves the other without an ownership claim.
The growing numbers of first-time buyers who get help from the Bank of Mum and Dad can also come unstuck.
“Some parents want a stake in the property rather than gifting money outright, but then their child is no longer eligible for the exemption,” Nosworthy says. If you have bought an investment property in the past, such as a buy-to-let, you will also be ruled out: “The rules apply to any property purchase, for any reason.”
Past inheritances also pose a problem. Nosworthy adds: “If you have inherited part or all of a property in the past, you are no longer eligible, despite never having purchased a property yourself.”
Those born overseas can run into difficulties, because in some countries people automatically receive a percentage of a property if a relative dies. “I’ve had clients rejected who had not even visited the property they had a stake in,” Nosworthy adds.
He said early legal advice will help you to assess your options and avoid a potentially nasty and expensive surprise.
GOOD VALUE
First-time buyers may also need to navigate complex rules if they are buying through Government-backed schemes such as Help to Buy, shared ownership or the starter homes scheme.
Mortgage lenders now offer competitive first-time buyer mortgages up to 95 per cent loan-to-value (LTV), but eligibility depends on the lender.
For example, some may accept couples even if one of them has owned a property before, others may not.
Private Finance mortgage consultant Chris Sykes says that five years ago the average 95 per cent mortgage charged 5.28 per cent: “Newcastle Building Society charges from 2.59 per cent, while HSBC offers fee-free products from 2.69 per cent.”