A family-sized step onto the property ladder
Home ownership can seem out of reach for many young people starting out in their careers. Government initiatives such as help to buy, shared ownership and stamp duty exemptions can only go so far. Earlier this year, The lndependent reported that the average price of a property for a first-time buyer in London has now hit over £420,000, with the rest of the country averaging £210,515.
We are often asked by family members and other interested parties how they can help those they hold dear to them get a foot on the property ladder. lncreasingly, help is needed to raise funds for a deposit, to act as a guarantor on a mortgage or put their savings into an account linked to a family offset mortgage.
While there are many far-reaching practical issues to consider, there are emotional ones too. ln particular, ensuring any joint property arrangements or support given does not become a burden or stress on any relationship requires thought. There are a number of different ways to structure the financial arrangements, depending on personal circumstances, which will serve to ensure all parties are satisfied.
Help with the deposit
A straightforward option for those with cash available is to transfer some estate value to family members. Potentially, such an outright cash gift can be exempt from future exposure to Inheritance Tax, subject to it meeting certain criteria.
Joint personal ownership
Where those with the funds available are keen to view the help as a joint investment opportunity, this can be an effective way to open up higher value properties than would otherwise be affordable. Stamp Duty Land Tax can bring in an unwelcome complication to this depending on existing property ownership(s) in place. Where this is the case a loan to the individual with a charge over the property may be preferential.
Another option for parties looking for a joint foothold in the market, without necessarily needing somewhere to Iive, is to form an investment company. Where a property is purchased to let, owning the property within a company can attract a lower rate of tax on the rental profits and offers flexibility on how and when those profits are taken.
lf you would like to explore the options and find out more in relation to your personal circumstances, please get in touch.
Date: 8th February, 2019
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