It has probably never been tougher to be a first-time buyer with the average age now being 30 before people can get a foot on the housing ladder.
Many first-time buyers need to accrue significant savings and parental contributions in addition to a mortgage to begin their property ownership journey.
But relying on the ‘bank of mum and dad’ can create problems with first-time buyer Stamp Duty Land Tax (SDLT) relief.
First-time buyer SDLT relief was introduced in November 2017 and was designed to help first-time buyers by removing any SDLT on the first £300,000 and charging 5% on the amount above £300,000 and £500,000.
However, banks often require parents’ names to be on the mortgage and title deed, rather than simply naming them as guarantors, and because the parents are not themselves first-time buyers, qualification for SDLT relief is lost.
Worse still, if the parents already own their own home, the entire purchase would be subject to a 3% SDLT surcharge, which is now applied to additional properties in an attempt to slow the ‘buy to let’ market.
The end result is an SDLT bill running into thousands for first-time buyers reliant on parental contributions.
This is certainly worth factoring in when you crunch the numbers to work out how best to fund your first home.