Moving house?
What to do with your current house?

Options for current house

A common trend in the housing market is for the applicants to move houses. This can be due to change in employment, assessing the needs for different environments or etc.


As a result of the above choices, applicants will have to make decisions on how the existing property can be utilized. If the applicants have no intention of keeping the property or if the applicants have no sufficient deposit to invest in the new property, they can look into the options of selling the property. Once you sell the property you will have to pay stamp duty on a single property.


However, if the applicants wish to retain the existing property customers have below choices that they can make.


  1. Sell the Property to Limited Company
    If the applicant is on a fixed deal and the deal period is ending, or if the applicant is on variable mortgages with no early repayment option can consider the option to sell the property to a Limited Company.

    The applicants can be the shareholders and Directors of the Limited Company. They can sell their own residence to the Limited Company which they own. From Limited Company perspective, applicants will need to pay additional stamp duty. However, on the new residence if the applicants do not have any other property, they will pay single property stamp duty.

    It is always recommended to obtain independent solicitor advice before undertaking the above transaction.

  2. Convert the Property to Buy to Let Re-mortgage under the Personal Name
    Applicants also have the opportunity to convert the property to a Buy to let re-mortgage under the personal name. Since the property was the main residence, most of the mortgage Lenders would consider the mortgage as a consumer buy to let.


    If the mortgage is a consumer buy to let, applicants will be covered by Financial Conduct Authority. However, this criterion would be specific from bank to bank.

    If the applicants do not wish to pay Early Repayment Charges, they can port their existing current residential mortgage to the new residence and obtain a buy to let mortgage on the current residence.

  3. Obtain a consent to let on the existing residence
    If the applicants are within a fixed deal which would cause them to pay Early repayment Charges. As a result, applicants can discuss with the existing mortgage lender to obtain a consent in order to let the property. Consent to let will have charges which will be specific from bank to bank.

Benefits and Cons of options

  1. Sell the Property to Limited Company
    Pros
    • Ability to pay single Property stamp duty if only one property is available
    • Tax savings that can be achieved through mortgage interest and payment of corporation tax instead of personal taxes
    • Ability to own multiple properties through Limited Company
    • Higher affordability due to lower stress test
    Cons
    • Charges incurred to setup the company
    • Legal fees, accountancy charges and other cost to run the company
    • Availability of lenders offering Limited company mortgages can be minimum
    • Interest rates can be slightly higher than buy to let personal mortgages


  2. Convert the Property to Buy to Let Re-mortgage under the Personal Name
    Pros
    • Availability of wide range of mortgage Lenders
    • The mortgage rates can be cheaper than Limited company mortgage rates
    Cons
    • Tax expense will be higher than a Limited company mortgage
    • Additional stamp duty on the second property
    • Rental income affordability might not be met


  3. Obtain a consent to let on the existing residence
    Pros
    • Ability to avoid early repayment charges
    Cons
    • Consent to let charges can be high
    • Most Lenders provide a consent to let for a period of a year. Renewal can be more costly

Stamp Duty when selling the Property to SPV

From the perspective of Limited Company mortgages, all the properties that will be purchased under Limited Company name will be subjected to additional stamp duty threshold.

The above depicted options can be unique everyone. At WIS, we will evaluate independent circumstances and will provide the most suitable options.

Most buy-to-let properties are not regulated by the Financial Conduct Authority (FCA).

Your home may be repossessed if you do not keep up repayments on your mortgage.

Download our FREE Buy To Let For Companies SPV guide here

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