selling/transferring property to my brother

00ec25

tyllwyd wrote: »

As far as I can see, your brother needs to buy the house from you so that you can pay off the mortgage, and then the three of you can agree how much of that money you give back to your brother & sister.

agreed
does the brother who wants to buy the house think he already owns a share of it?
ie if you say he is paying 212K to be split equally between you and your sister, and this represents the entire house, for example:
either
£212 means each person's current share is worth £106k and the house is "worth" £318k (ie 212/2x3) so you would get 106 - 80 mortgage leaving you with 26 and your sister with 106 and obviously your brother would get his 106k share of the value for "free" since he notionally (but not legally) already owns 1/3 of it
or
brother pays 212, house "worth" 212, each share thus 212/3= £70.6k , you do not get enough to pay off your mortgage!

as tyllwud says - what is the REAL value of the property as this will dictate what the brother can borrow in reality - forget the 250k figure . If brother is proposing to get a loan for 212k on the basis that is only x% of the real value of the property then the mortgage company will lend on the basis of LTV ratio of the market value not your supposed figure.

zed7

Thanks so much. I really appreciate all the advice. My brother is using a mortgage to buy so it is not a cash buy. I am still a bit confused over the stamp duty thing. There is no deposit, so the 85% he can get LTV or LT purchase price is the total amount of the transaction for him. The actual value of the house is much higher, but we 3 have an agreement and understanding to sort this with these amounts agreed. So I am selling it at £250 so that he can demonstrate that he is getting a 85% mortgage which is £212k - there will not be any financial movement on a deposit as it it won't exist. I think I have to gift him that or something. This is so that he can avoid a stamp duty of £9000. Is this right?

zed7

I forgot to add the property actual value is £400k. But my brother only qualifies for £212,000 and this based on lending 85% to a purchase price of £250k. Is there another way around this and still avoid stamp duty?

00ec25

what will hit your bank account on the day of completion is cash money - the fact your brother has had to borrow (take a mortgage in his own name) to get that cash is irrelevant, your sale to him is 100% cash based.

He is NOT taking over YOUR mortgage so the sale is based purely on what he actually pays you, this is called the "charegable consideration" involved in the sale. So in your case this amount is £212,000 in cash

the "gifted deposit" (250 - 212) which you are giving to your brother is not part of the chargeable consideration so the SDLT will be 212 @ 1% = £2,120,
think of it this way, he is paying you 212 in cash (his consideration) you are selling him a property (your consideration) those are the only 2 items invoved in the transaction. The fact the property is being discounted by you and sold at 212 rather than the 400k you think is it "worth" is irrelevant. You give title to the property, he gives 212 cash, so transaction based on 212 cash exchanged between him and you

in terms of avoid SDLT you can't - if your brother can borrow more than 212 then he could physically pay you as high as 250 and still only have to pay 1% SDLT, borrow more than 250 and obviously this means 3% rate

I know little about mortgages but recent posts on here suggest that gifted deposits being allowed as part of a mortgage application are becoming rare - has he got a confirmed mortgage offer on the basis of 250 value and 85% LTV?

Please note:
if at a later date brother pays either you or sister more money to reflect the fact he originally bought it at a discount to its "value" then, if HMRC find out, they will treat this as a "postponed consideration" and therefore reasses the SDLT based on the total paid across the two (or more) payments. So if brotehr wants to give either of your more money atr a later date make sure it is recorded as an outright gift not a further payment for the house