Feeling terrible

[Northernparsley]

Just found a house and had an offer accepted - yay! We accepted an offer on our current property in September and our buyers have been waiting for us to find somewhere. In a meeting with our financial advisor today he said that as we are buying a much cheaper property than originally envisioned (a renovation project instead of the finished article), we could afford to buy the new property, convert our current house to a buy to let and still have enough money to do what we want to the new place. This makes us fully in control of the buying process without unforeseen hold ups and very likely to make the stamp duty deadline. If we don’t make the deadline it will cost us around £20,000 extra. It was a complete curveball but having done all the sums makes complete sense.

Decision is therefore made but I feel like scum. We’ve effectively strung our buyers along and then dumped them now they are of no use.

I feel like the worst person in the world right now - does the guilt subside?

You feel like scum because you are scum. Your buyers have been very good to wait for you and you have screwed them over.

This makes us fully in control of the buying process without unforeseen hold ups and very likely to make the stamp duty deadline. If we don’t make the deadline it will cost us around £20,000 extra.

If you were comparing a single house purchase to a chain of 5 or so, you might have a point - but we're only talking 2 houses here, and your buyers will also be very motivated to make the stamp duty deadline. I think you're making excuses to try and justify screwing them over.

In honesty you have also to look at what's best for your family so don;t feel too bad about what you have decided. We're talking serious amounts of money and long term commitments so fuck the naysayers on this thread! You're not an awful person, sales fall through all the time, there's nothing to say your buyers wouldn't have pulled out last minute for their own reasons either, you just can't know.
Personally I was a landlord and found it a total ballache so got out of it a few years ago but for those comfortable with the hoops and pitfalls it still makes sense.
Doing the right thing doesn't always feel good or look good but I believe you made a correct choice for your family and the future.

As others have said, it's not so straightforward. You will be embarking on home improvements as well as the hassle of letting property - and it can be a hassle - I speak from experience here - both my husband and myself have let properties in the past.

Personally I would prefer plan A, and keep life simple - but it's your decision at the end of the day, which you say you have made. So why the faux hand-wringing? Good luck, hope it doesn't backfire on you at some point in the future.

People buying a buy-to-let property or second home still need to pay a 3% surcharge on the standard stamp duty rates. from Which article.
So you've screwed yourselves over as you're still going to have to pay stamp duty on your property. And you've screwed over your buyers as they are unlikely to be able to buy a place before the end of March. You did the wrong thing!

Sometimes people feel guilty because they’ve done the wrong thing.

OP, you know it was a crappy way to behave, that’s why you feel guilty.

Just a heads up - mortgage lender wouldn't offer me a mortgage on a new residential property until I had at least 3 months worth of rental income to show after converting my current residential mortgage to a buy to let. Also converting to BTL adds 1% on top of your current interest. You'll also have to pay an early repayment charge on your current mortgage to convert it, which is normally a few grand unless you get consent to let on your current mortgage from your lender.

That is a very wrong thing to do. They have been waiting for months and will likely miss the stamp duty holiday themselves now. I would just buy another house as a BTL if that's what you actually want to achieve.

I am a great believer in kalma.

I don't think it's a very nice thing to do. Your buyers may have missed out on some nice properties because they were committed to yours, and they probably wont make the stamp duty deadline now.

Our purchase has just fallen through. Although we were the ones that pulled out, it was because of our seller lying to us. We have wasted such a lot of money on it. I do think that at the least you should reimburse their legal fees and survey costs. Sometimes these things are understandable (unexpected bad survey/searches, redundancy etc), but simply changing your mind isn't very nice.

The people saying they'd never do out the buyers are just self rightous. It's upsetting i know but you can't live your life by doing what is right for strangers. You have to do what is right for you. But a nice gesture would be to pay them back the costs they have incurred.

Do bear in mind though that whilst you will save max £15k on stamp duty if bought before march it will cost you 3% of the price for the stamp duty surcharge on a second property, capital gains when you sell on any increase in price and taxes on your income plus other expenses such as landlords insurance and agency fess, repairs and maintenance. I'm now selling the property I was renting out (previously my home) after two years as the extra stamp duty on my house would be the equivalent of ten years plus net rental income so just not worth it.

I couldnt do this. I also couldnt be a landlord. Your house could get messed up, they might not pay the rent, they might sublet. Would you pay a managing agent? Not that the do much or do it yourself whilst doing up the next property?

But I pride myself on sticking to my word

@Bells3032 not self righteous, just honest decent people. OP doesn't need to do this, she is making that Choice. Choices have consequences and the consequence is someone looses out badly by her actions. That's fine but she admits to feeling guilty, and quite rightly so.
I may be self righteous for having that view but if thinking of the consequences of your actions, makes me self righteous so be it.

Our purchase has fallen through today as the seller pulled out. They couldn’t handle the stress of moving apparently although I wouldn’t be surprised if we’ve actually been gazumped. We have lost about £2k in fees and the time wasted. It would be incredibly shitty of you, yes.

The stamp duty on the second home isn't relevant if the new one is pitched as the main residence. We've just been through exactly this scenario.
If you are buying a second home that will be let out then the stamp duty 3% will be payable.

Here's the official link to calculate it.

www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

It would be a very shitty thing to do but as you have no qualms about BTL and being a landlord that does not surprise me.

Kind of hope you get tenants who trash your house and don’t pay rent - would serve you right!

@Snakeplisskensmum I think you’ll find that the OP will be liable for the 3% extra.

*Sometimes people feel guilty because they’ve done the wrong thing.

OP, you know it was a crappy way to behave, that’s why you feel guilty.*

I completely agree with this, and as previous posters have pointed out the tax implications on rental income and second homes are unlikely to make this the good financial decision you think it is. I'd say it's questionable financially and downright wrong morally.

I should have mentioned that I twice checked with HMRC about this issue - buy new home as new resident, renting out existing home as buy-to-let. I can assure you with 1000% certainty that the 3% applies. However, that can be claimed back if the house is sold within 3 years.

Just chipping in as a property solicitor to confirm the higher rate SDLT definitely applies. The main residence exemption only applies if there is a disposal of the current main residence (I.e. selling your current main residence to buy a new main residence).

Ah ok, we did dispose of our main home. We have had a small BTL for years so I was worried we would be hit by the 2nd home 3% but of course we didn't.

I’d nit worry about being a landlord, I’d worry about capital gains tax though when you sold one. Has your financial advisor done the calculation?

Ouch! Not only have they been waiting patiently for you since September, they're also most likely going to miss the stamp duty deadline which could ultimately cost them £££. I guess you've made your decision but its a really crappy thing to do tbh after several months.