Protect your first time buyer status
First time buyers are the live-blood of the property market and this is recognised with “first time buyer status” afforded benefits from tax incentives to more attractive mortgage products. Therefore it’s imperative that you think wisely and seek professional Mortgage, Legal and Tax advice before you squander what could be a once in a lifetime opportunity and use your first time buyer status effectively.
Property value
If you’re buying your first home you can claim a Stamp Duty Land Tax (SDLT) discount/relief and use your first time buyer status effectively.
There is currently no SDLT up to £425,000, and 5% SDLT is applied on the portion from £425,001 to £625,000. You’re eligible if you and anyone else you’re buying with are first-time buyers. If the price is over £625,000, you cannot claim the relief (source https://www.gov.uk/stamp-duty-land-tax , date 12/8/23) it therefore is prudent to buy a property as close as possible to £625,000 first time out, if affordable.
One trap that first time buyers can easily fall into, which is counter-productive for utilising the Stamp Duty Land Tax discount/relief in full, is part-ownership/share-ownership schemes such as those run by housing associations and developers. While it may enable first time buyers to buy a bigger property earlier on in life they are only effectively offsetting the first time buyer Stamp Duty incentive at the share level which is often just 25% of the property value under such schemes. It therefore may be wise to save for longer and “buy a property outright” to utilise 100% of this Government first time buyer incentive against the value to use your first time buyer status effectively.
Buying with a non-first time buyer
There is a segment in the market – “a Niche”, if you will allow me a shameless plug – which is collectively known in the mortgage industry as “joint borrower sole proprietor” mortgages. The concept has been designed by Mortgage Lenders to use your first time buyer status effectively.
There are two main advantages of joint borrower sole proprietor mortgages (JBSP):
Affordability
The idea is the “joint borrower” can assist another person with their “mortgage“ without by being party to the property. Typical examples include parents to children, children to parents, husband to wife. Some Mortgage Lenders allow broader support such as boyfriend, girlfriend, foster parent, uncle, aunt, nephew, niece, friend etc. The Mortgage Lender will insist the “joint borrower” receives fully independent legal advice as may impair their own finance plans either now or in the future, as they are fully liable for the mortgage payments. Most Mortgage Lenders will insist the “joint borrower” resides elsewhere, and not in the mortgaged property.
Effective use of the First time buyer status
The “sole proprietor” is the full legal owner of the property, with only their name appearing on Land Registry. This presents the opportunity to utilise just one person’s first time status.
For example, parents want to help buy a property for their daughter. She is a first time buyer and they own a property already. She becomes the sole proprietor and enjoys the benefits afforded to first time buyers. As a side the parents also keep the property outside their estate.
Another example could be boyfriend owns a flat and he is looking to buy a house to live in with his girlfriend who is a first time buyer. Depending on the lender he can go on her mortgage as a “joint borrower” to aid affordability and contribute towards the deposit, but buy in her name only to access the FTB benefits.
It is important to state while the Mortgage Lenders may allow you use your first time buyer status effectively by facilitating the JBSP scheme they are not taking any responsibility for how these products are used or the tax outcomes so you must seek professional Tax Advice.
Mortgage product choice
First time buyer mortgage products can be more attractive.
Some Mortgage Lenders will allow next time buyers to access these products if the other applicant is a first time buyer. Presentation of the case can also be important with the first time buyer needed to be recorded first in the application form.
So care needs to be taken in your research and it is prudent to enlist the services of a professional Mortgage Broker such as Niche Advice so you use your first time buyer status effectively.
