Attending university is an important time in a young person’s life. It’s also an extremely expensive time. One of the expenses you need to consider is housing, which can cost anywhere between £150 and £225 per week, depending on where in the UK the university is located.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
One solution is to buy a home for your child to live in while they attend university. If the property is large enough, you could also rent out spare rooms to help offset the mortgage payment or provide spending money to your child.
There are things to consider when purchasing a student home including upfront costs, risks of owning a property with students living in it, management of a rental property, and potential tax schemes for which you may be eligible.
Stamp Duty
How much you’ll pay in stamp duty depends on whose name the house is under. If you purchase the house for your child and already own a home, it will count as a second home so the rate will be 3% above the standard residential rate.
If your son or daughter buys the house (even if you act as a guarantor or provide some money for the deposit) then only the standard stamp duty is applied. If you plan to co-own the property then you simply calculate the stamp duty according to ownership.
Rental risks
Owning a property normally comes with a certain amount of risk. Letting it out to university students only increases that risk.
Between hectic schedules, parties, and the general chaos that accompanies a student’s lives, the wear and tear on the property may be more than you bargained for, even if your own offspring live there.
Ensure your child chooses responsible, trustworthy friends to live with to avoid major issues.
Rental property expenses
Managing a property guarantees you’ll have costs associated with running the home. Since you are a landlord for your student’s home, any cost you incur from running or maintaining the rental property, as long as it is exclusively for the property, can be deducted from rental income to offset your taxable income.
Typical deductible expenses include, but are not limited to:
- utility bills
- ground rent and service charges
- council tax (if paid for by the landlord)
- buildings and contents insurance
- accountants’ fees
- Other costs related to the property, such as gardening and cleaning costs, and phone calls.
Rent-a-room scheme
One scheme you may be able to take advantage of is rent-a-room relief, which allows you to receive up to £7,500 in rental income tax free annually when you rent out a furnished room in your home. If you rent out the property to your child and they sublet a room or two in the home, you can let your child use the rent money to counteract living costs while studying.
If rental income exceeds £7,500, you can work out the taxable profit by deducting £7,500 from total rent income or by using the income less expenses calculation if more beneficial. For more on the intricacies of this particular scheme, visit gov.uk.
While you’re making an investment in your child’s future, it is also a good opportunity for you to invest in property.
Next steps
As a busy doctor or dentist, you may not want the hassle of applying for another mortgage so it’s prudent to consult with a mortgage specialist at Dental and Medical Financial Services before purchasing a home for your son or daughter to live in while at university.
We can eliminate the inconveniences for you and make the process as smooth as possible, so all you need to worry about is your child graduating.
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