In this scenario, you do run the risk of having to pay stamp duty twice – once when you purchase the property and again when you grant the new leases. There are tax-efficient mechanics which can be used to avoid paying tax twice.
Whether you granted the leases into a limited company or into individuals’ names (in this case, into your children’s names), SDLT would be payable again because there is a “chargeable consideration” – something given in exchange. The release of the mortgage counts as chargeable consideration for these purposes.
However, if you can persuade the vendor to split the property into three leases for you to purchase instead and transfer the freehold separately, you would pay SDLT based on the combined value of the leases and you would be eligible for multiple dwellings relief. As a result, you’d only need to pay stamp duty once. Because the majority of the value would be taken from the freehold and put onto the leases, the value of the freehold will likely be too
As with the case with any purchase made with bridging finance, you do need to ensure that you will be able to remortgage each flat in time to repay your bridging loan. Unlike regular high street lenders, bridging lenders are typically less lenient regarding repossession and will take action to repossess your property much quicker. Considering the current situation within the mortgage market, it may take longer than usual for you to arrange your new mortgages.
For this reason, you need to ensure your mortgage brokers and conveyancers are working quickly to get your new mortgages arranged in time – fortunately, our connection with Starck Uberoi Solicitors helps us ensure deadlines are met, so you won’t need to worry.