Property, legal and taxation aspects of mortgage advice
Domain 6 - Property, legal and taxation aspects
This domain tests whether you understand what the lender is taking as security, how the transaction completes, and the tax the client will actually pay.
Tenure and title
Freehold (ownership of the property and land), leasehold (a term of years with ground rent, service charges and a landlord), and commonhold. Lenders typically want a lease to run well beyond the mortgage term - a common minimum is 70–80 years remaining at application, and some require 40 years beyond the term. Watch for short leases, escalating ground rents, onerous permission fees, flying freeholds, restrictive covenants, easements, and listed building or conservation area consent. Shared ownership and shared equity carry separate lease restrictions.
The legal process
Instruction of a conveyancer, local authority search, drainage and environmental searches, chancel repair and mining searches where relevant, enquiries of the seller, mortgage offer, report on title, exchange (binding, with a deposit) and completion, then registration at HM Land Registry. Buildings insurance must be in force from exchange.
Taxation
Stamp duty land tax applies in England and Northern Ireland; Scotland has LBTT and Wales has LTT. In England, from 1 April 2025 the standard nil-rate band is £125,000, with 2% to £250,000 and 5% to £925,000. First-time buyers pay nothing up to £300,000 and 5% on the next £200,000, with no relief above £500,000. An additional-dwellings surcharge of 5% applies to second homes and most buy-to-let purchases (from 31 October 2024), plus 2% for non-UK residents. Capital gains tax can apply on disposal of a second property; principal private residence relief generally covers the main home; inheritance tax may apply to the estate.
Worked example
A first-time buyer purchases at £350,000. SDLT is nil on the first £300,000 and 5% on the remaining £50,000, so £2,500. Had the buyer already owned a home, the 5% surcharge would add £17,500.
Traps
Assuming SDLT rates are identical across the UK; forgetting the additional-dwellings surcharge; ignoring a short lease; missing chancel repair liability; and assuming the estate agent handles the legal work.