Technical question on family members buying me a new property

[Bob Trob]

Hello all. I have a question about buying a new property, my siblings are going to buy it, but they own properties already. To solve the stamp duty problem, I was suggesting that we buy in my name and I grant them a mortgage on the property for the total final sale value in lieu of interest over the period of my life, or vacation of the property. Is this a possibility and will it avoid the government grabbing the house to pay for my care if that situation arises?

[atticus]

This sounds like a fairly obvious avoidance scheme. Take professional advice: I think your conveyancer will be quite nervous about this.

[Pezza54]

If the property is bought for say £250k, a first time buyer doesn't pay any stamp duty
A buyer purchasing a second property would pay 5% stamp duty on the first £125k plus 7% on the remainder £125k = £15k total stamp duty

In the above example, your siblings could loan you £250k interest free so you can buy the property in your name
The loan should be secured on the property with a charge registered

IMO a formal loan agreement should be drafted. The terms of the loan should ensure your siblings have not gifted you the money and they have not received any beneficial interest in the property when you buy it

If the loan is interest free your siblings would lose out financially if the property rises in value before it is sold. On the plus side if you own the property as your main place of residence, you will not have to pay CGT when it is sold. If your siblings own it they may be liable for CGT

[atticus]

The problem as regards SDLT returns is that under the proposed arrangement the OP will not at any time have any equity in the property.

As a matter of information to others, a secured loan gives the lender a beneficial interest.

[Pezza54]

Please read the article "Lending Money to Family to Buy a House" at www.parachutelaw.co.uk
As it is a family loan agreement the interest rate can be very low or even zero interest

[atticus]

Please read the OP for the proposed terms.

[Pezza54]

Lenders aren't going to let the siblings take out a mortgage on the property OP owns. If the borrowers defaulted on the mortgage the lender will have trouble selling OP's property to recoup their money
That's why I suggested an alternative, a family loan
Hopefully OP has wealthy and generous siblings