Is there a way to beat the Stamp Duty Holiday deadline?
- Published: Tuesday 08 December, 2020
- By: Commercial Trust
Landlords keen to utilise a discount on stamp duty, face uncertainty around hitting completion in time. Jorden Abbs, director of sales at Commercial Trust Limited, shares a tactic which could mitigate this risk.
Tactic to tackle SDLT holiday end date
Discussion is rife as to whether or not the Stamp Duty Land Tax (SDLT) holiday will be extended. Pressure to complete by 31st March is significant, with no guarantees on hitting the deadline.
Many UK landlords are keen to take advantage of the opportunity to save on property purchases, afforded by the Stamp Duty Holiday discount.
However, no-one investing in property wants to find themselves missing the deadline and receiving a much larger tax bill as a result.
Most solicitor firms we work with have confirmed that their doors will be closing for Christmas on Friday 18th December, so this leaves very little time to complete, when offices re-open in January.
I want the discount, what should I do?
Our message to all clients is that they must act now, if securing the stamp duty discount is a key objective.
If you cannot initiate proceedings this week, then the next best is to get everything you need ready for January.
Speak to your legal representative, get an assessment from them as to their workload, New Year operating dates and if the turnaround time is reasonable in their eyes. Be aware though that no-one can offer guarantees of success.
There is, however, one further tactic that may be helpful to landlords.
Bridging loans may offer a solution
Bridging loans have typically shorter turnaround times to completion than mortgage applications.
By using a bridging loan to purchase a property, and then transitioning to a buy to let mortgage, you may put yourself in a position to complete sooner than you would by starting with a mortgage application.
The transition from bridging loan to buy to let is technically a remortgage, so not subject to stamp duty.
It is important to be aware that the interest on bridging loans is charged monthly, so they are typically more expensive than a mortgage payment.
It is therefore important to calculate any saving on the stamp duty versus the cost of the bridging loan.
Furthermore, most property transactions will involve the work of a solicitor. So, much like being a table for two in a restaurant, if the party of 12 beside you order before you, you will still be held up behind them, regardless of the size of your order.
Three routes to using a bridging loan
If you choose to pursue a bridging loan, there are three potential routes on offer from lenders.
Firstly, a small proportion of lending opportunities offer a “Bridge to let” product, designed specifically to revert to a buy to let rate as part of the product specification.
Secondly, some lenders will allow you to make a bridging loan and buy to let application concurrently, for the same property. This option means you may narrow the gap between the bridging loan completing and being able to put the buy to let product in place.
It is advantageous to switch to the buy to let rate as soon as possible, as generally the payment will be cheaper.
Thirdly, you may be best suited to a product which is a straight up bridging loan, where the application for the buy to let has to be entirely separate and a mortgage offer will not be forthcoming, until the bridging loan completes.
This may still get you a completion to secure the property ahead of any stamp duty deadline.
Some bridging lenders can turn deals around particularly quickly because, rather than wait for all Land Registry searches to come back, they will take out indemnity insurance to cover them whilst the searches come back. This is why some lenders can turn around deals particularly quickly.
When discussing the options make clear your objective with your advisor. They will look for a product that suits your needs and circumstances.
As a specialist broker, we are processing deals all the time with a wide range of lenders, so we are aware of turnaround times and can offer guidance on this.
Whilst, like solicitors, we cannot give a guarantee of success in hitting the March deadline, this is one tactic you may like to consider.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.