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When you buy a house or flat that’s going to be your main home, you will pay stamp duty on everything above £125,000. If it’s a buy-to-let or second home, you pay stamp duty on any property costing more than £40,000.

 

What is Stamp Duty?

In England, Northern Ireland and Wales you’re liable to pay Stamp Duty when you buy a residential property, or a piece of land, that costs more than £125,000 (£40,000 for second homes).

 

This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.

 

In Scotland, when you buy a property or land you will pay a Land and Buildings Transaction Tax instead of Stamp Duty.

 

How much is Stamp Duty?

When you buy a property you’re planning to live in, you won’t pay any Stamp Duty on the first £125,000. You’ll then pay 2% on the portion up to £250,000 and 5% on the portion up to £925,000. Between that point and £1.5m, it’s 10% – then 12% on anything over £1.5m.

 

There are several rate bands for Stamp Duty.

 

For example, if you buy a house for £275,000, the Stamp Duty Land Tax (SDLT) you owe is calculated as follows:

 

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

 

Stamp duty for residential leasehold properties are charged differently.

 

Stamp Duty on second homes:

Buyers of additional residential properties, such as second homes and buy-to-let properties, will have to pay an extra 3% in Stamp Duty on top of current rates for each band.

 

This increased rate applies to properties bought for £40,000 or more.

It doesn’t apply to caravans, mobile homes or houseboats.

 

If you buy a new main residence but there is a delay in selling your previous main property, you’ll have to pay the higher Stamp Duty rates as you’ll now own two properties.

 

When is Stamp Duty not payable?

You’ll automatically avoid Stamp Duty if you buy a property below £125,000.

But for many homebuyers this isn’t possible.

 

There are other circumstances in which Stamp Duty is either not payable or can be reduced:

 

Slightly over rate band. If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.

Transfer of property in separation or divorce. If you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home value to them.

 

Transfer of deeds. If you transfer the deeds of your home to someone else either as a gift or in your will they won’t have to pay Stamp Duty on the market value of the property.

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Photo source: Elle Decorations UK http://bit.ly/2iPriZq

Raising the value of the house can be done in many ways. You can start re-shaping it, creating more useful space, refurbishing, changing the design, and maybe even adding some technological improvements (smarthomes).

A clean-cut way to add value inside the home is choosing valuable antiques. Special decorating objects that blend in the design, old elements from an old house that can be reused and kept for their high value, furniture from antique shops…

It will give you some headaches when it comes to the general design of the house, but with a very critical eye and some rightfully chosen antiques, your house is going to be… precious!

Lifestyle: Antiques shopping in the UK

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Preparing to leave a house can be a bit of a hustle – mentally and practically. Both of these aspects require ahead preparation.

To make things easier, start to plan the moving as soon as possible. Even immediately after you signed the papers for a new house.

Photo source: https://c1.staticflickr.com/9/8783/17027548557_253e53a072_c.jpg

Here are some steps that can be made even two months before the actual move.

Keep vs. throw away-s. Decide what you want to take away with you to your new home and put it on a list. Go through every room of the house and put away the things that aren’t helpful for you anymore. Leave them for the future inhabitant of the house – if they agreed to this, or  simply throw them away.

Get all the wrapping supplies. Estimate the number of boxes you are going to need and buy them or ask a local shop to keep some of their product boxes for you. You will also need: bubble tape, tape, markers. Think about the special containers for the dishes or your wardrobe.

Early packing. With even a month before the moving you can start to pack some of the items you do not use frequently. Label them clearly and put them aside.

If you are even more into detailed planning you can use this timeline on RealSimple.com. Try to stick to it as closely as possible because delays mean rescheduling and takes even more of your precious time.

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There have been cases where people have bough leasehold properties on leasehold land, leaving themselves wide open to pay sometimes eye watering rates. While some charges start off reasonable, they very often increase sharply.

There have also been cases where the land beneath the leasehold property has been sold on, with the new contractor then imposing new rules and rates.

Source: Wikimedia.org/ labeled for re-use

Either way, homeowners face huge charges and are unlikely to be able to onward sell their properties for a decent price.

 

Four things you should be able to tell clients about when selling leasehold properties:

 

Ground rent. Usually paid annually to the landlord and may rise over time. How much is it, and what are the terms? i.e. Does it double every year or follow inflation? These costs can quickly spiral out of control.

Service charge. How much is it and what does it cover?

Reserve fund. This is a sum that leaseholders pay to a managing agent for works that may have to be addressed in the future. Is there one, and has it built up? This can be presented as a benefit to a buyer, as potential future repairs may already be covered.

Length of lease remaining. Very often, an add will advertise the lease length as it was at the very beginning of the properties life span. So, this may say 999 years’ lease. Even though only 100 years remain. If the remaining lese length is 85 years or less, be aware. Many lenders will not lend on less than 80 years. The cost of extending a lease after that time also increases dramatically.

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I am 22 years of age and would love to buy my own property. 

copyright: https://upload.wikimedia.org/wikipedia/commons/c/cc/Captain_Bligh_House_London.jpgBeing a first-time buyer usually means forking out rent, saving for a deposit and playing catch-up with ever-rising house prices all at the same time! 

London is the ideal place to buy a house or an apartment for me. It is a great place to live in, but it can be expensive if you are a first time buyer.

Not only are properties expensive to buy (average price in the borough of Redbridge is £446,581) but I will also need at least 20% deposit + stamp duty costs + legal fees on top of that.

Based on my salary, it would be impossible to apply for a mortgage based on the average property prices in London. My own research shows that there are two solutions for purchasing a property.

– Buy a property out of London as it is a lot cheaper, therefore, affordable for me.

– ‘Help to Buy Scheme’ 

The scheme requires a minimum 5% deposit of the property value with the Government offering an interest-free loan of a further 20%. The remaining 75% is covered by a standard mortgage.

As an example, if you want to buy a £200,000 property under the Equity Loan scheme, you would need a minimum deposit of £10,000 and to qualify for a £150,000 mortgage. The Government then provides an equity loan of £40,000.

Another option would be to buy jointly, either with friends or family.  I think this is my preferred option, so far. 🙂

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Millennials prove to be wise and take easy steps into becoming home owners. Young people (18 – 34 year old) are very considerate when it comes to financial planning. Latest research shows that they choose to re-mortgage, but they make sure that it will not surpass their monthly income.

Considering all the age categories re-paying their mortgages, millennials are making the biggest contribution to the overall budget: £908 per month.

The main reason for re-mortgaging is reducing the costs of their monthly mortgage which is a savvy way of looking at these type of financial solutions.

More upon the subject of the millennials behavior when it comes to mortgages in the latest article on Property Reporter.

Image copyright: Property Reporter

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