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Could my brother buy out my ex-partner's share in our property? How would it work?

robac
robac Posts: 3 Newbie
in House buying, renting & selling
I own a property with my ex-partner (unmarried). She has moved out and I am still living in it.

We will likely need to sell the house, but I would like to explore options for buying out my ex-partner with the help of my brother.

Details:
- Current valuation is 620k
- Outstanding mortgage balance is 427k
- My ex and I have amicably agreed that in the event of a sale, equity would be split 50/50 i.e. ~96k each
- My brother and my combined income is 142k
- He does not own any other property
- Neither of us have any other outstanding debts
- My brother has ~40k in savings

It's very much exploratory at this stage, and I'm just looking for a little insight on how it would even work. Would it be required to sell / buy the house and incur stamp duty, or a case of negotiating a new mortgage with a lender together with my brother for the new valuation, then paying my ex-partner in cash and changing the deed? Given the numbers above, having to pay stamp duty could be prohibitively expensive.

Comments

  • G_M
    G_M Posts: 51,977 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    The mortgage will (almost certainly) have to be paid off.

    You and brother will then have to apply for a new mortgage in your joint names. Assuming you can get one, for, say, 427K, you use this to pay off the existing mortgage.

    Simultaneously your brother buys your ex's share of the property for 96K. But oops! he only has 40K savings. So either he finds another £56K from somewhere, or you and brother neeed to increase your new mortgage from 427 to £483k.

    However if you take out a joint mortgage for 483, you and your brotther will not have equal shares, since effectively you've put 96K into the now jointly owned property, he's put £40K in, and the rest is made up from a joint mortgage.

    You cold deal with this in a number of ways eg
    * owning as tenants in Common with you owning 65% to his 35% (my maths is not exact) ie you own around double his share

    * some arrangementt whereby he contributes more to the mortgage repayments than you to make up for his lower cash input

    You'd need a Deed of some kind drawn up to defuie this, as well as how any sale would be dealt with, and what would happen if one of you wanted to sell and the other didn't etc
  • DigForVictory
    DigForVictory Posts: 11,905 Forumite
    Name Dropper First Anniversary Photogenic First Post
    Blimey, what a hero!
    Alas there are a few potential tipping points, most of which have been sorted by G_M but never underestimate an ex's ability to really mess things up. I don't want to sound too cynical but lay out the benefits to the ex in nice really easy to understand numbers and then explain that if it all works, there's a cooperation bonus of £X in it. (If you have not got any other used-to-be-joint finances sorted settled & nailed down, include these in the negotiations.)

    Then, life happens, & how are you either of you planning to cope if either of you finds Mx.Right? Get that sorted pretty much before you start trying to nail a mortgage as after is Far Too Late but before shows intelligent planning which mortgage companies do like to see.

    Finally, you both need to update your Wills.

    Best of luck!
  • saajan_12
    saajan_12 Posts: 3,618 Forumite
    First Anniversary Name Dropper First Post Combo Breaker
    So you have 96k equity and brother has 40k savings. That means you would need to raise a mortgage for (620-96-40) = £484k. You would use that and the brother's savings to pay off the current mortgage and pay the ex-partner's 96k equity.

    Stamp duty: you/brother are purchasing the expartner's 50% share (half mortgage + half equity) for £310k, so stamp duty would be payable at normal rate on this. The stamp duty calculation depends on the split between OP and brother. You could

    Split between OP and brother: You could own as joint tenants so you both own 100% if the other dies etc, or you could own as tenants in common where you predefine the % shares. Who will be paying off the mortgage? The 584k mortgage is 78% of equity currently

    -> OP contributed 96k = 15.5% equity + A% of monthly mortgage payments so should own 15.5% + (78% * A )

    -> Brother contributed 40k = 6.5% equity + B% of mortgage payments so should own 6.5% + (78% * B)

    Other Considerations:
    1) This would likely maximise both of your borrowing potentials, so if either OP or brother want to buy / invest elsewhere, they would need to sell. Have a provision for what circumstances either can sell under, e.g. how much notice to vacate, how to value property, how to remove mortgage liability from the person wanting to exit.

    2) Who would be living at the property? Would they be paying rent if their usage is greater than their ownership share? Note this doesn't create a tenancy as you are both owners.
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