Joint mortage with mother & CGT etc

SpottyDottie

Hi

Just wondering if anyone can offer any advice. I bought a house 8 years ago with my mother as a joint mortgagee. (She was supposed to be just a guarantor but it seems she's been added as as joint mortgagee) but that's another issue.

The house was originally purchased for 108k and is now worth approx £140k, with a 90k mortgage.

My mother has her own property and has never lived in my property, which I now share with my fiance. She's never paid any money towards the mortgage or upkeep of the house etc and is not looking to make any financial gain from the property - the intention was only to help me secure a mortgage for a property.

We've since realised that as a joint mortgagee, we should have possibly obtained a declaration of trust to say that my mother has no financial interest in the property, but at the time we weren't aware of this or the tax implications.

I would like to remove my mother from the deeds / mortgage with a view to buying a new property in the future with my fiance but I'm concerned about what the legal / tax implications of this are and where to turn for advice. Should I see a solicitor for advice or is there anyone else I can go to for help in removing my mother from the mortgage and also to help explain the tax implications etc?

Thanks

Sleepy_head_2

Hi

My sister was in a similar situation to you but did have a Deed of Trust. However as far as we know this was purely to protect her should mum die as the inheritance tax implications would be disastrous. I don't think the Deed was drawn up to protect against tax implications of the here and now.

I think a solicitor is the best person to contact, I know after 2 years when my sister came to remortgage and could get a mortgage in her own right, the Deed was destroyed and that was that!

Good Luck

Sleepy head x

CLAPTON

assuming you jointly own the property equally then there will be a cgt liability if your transfer the ownership from mum to you

gain will be 140,000 - 108,000 = 32,000
you can decut buying and selling costs leet say 2,000

so gain 30,000
you mums share is half i.e. 15,000
she ahs a cgt allowance of 10,600
so net gain is 4,400
on which she will be taxed at 18% or 28% depending upon her income situation

holly_hobby

What a howler !!! (if you are sure that this was what the lender agreed ie Mum only standing as guarantor and that they did not require her to be party to the mortgage ?)

Assuming your recollection is correct, was Mum also placed as joint owner on the deeds under tenants in common, during the purchase ?

Or is the !!!! up just at the processing side of the lender, i.e deeds are only in your name, but the lender has the mge in your own and Mums name ?

Why didn't you contact the lender about the "error" when it was discovered ?

Due to the fact in effecting your Mother as joint mortgagor, she is both severally and jointly liable with you for the mge, its servicing and repayment (if you failed to maintain payments), and can also (along with you) be pursued for upto 12 yrs for any neg equity on sale All this, on top of the fact that their maladminstration and error in processing, has directly exposed your Mum to a tax liability that would NOT exist ONLY FOR THEIR ERROR ?

I would have been jumping up and down when I discovered this, and played merry bloody hell with them .... !!

As it currently stands (assuming she is on the deeds and mge), she is on the face of it liable for CGT on half of the net gain, if she recieves benefit of it (net of annual personal CGT allowance as Clapton highlights above).

Aside from the lender's error, and if she is on the deeds, another way to mitigate any liability, will be to demonstrate your Mum has no beneficial ownership in respect of the property (beneficial ownership may be applied to individuals whom are not necessarily party to the mge/deeds, but receive financial benefits as if they were the owner, and is often used to split cgt for married couples where a property is sold, with only 1 pty on the deeds/mge - usually proving rent or proceeds on sale went into a joint bank account is the route used. In this case we are looking at it from the reverse, ie - that although pty to the mge (deeds ?), she has or will receive NO financial benefit of ownership), this could be evidenced that she was MEANT to be guarantor NOT mortgagor (which was entirely the lenders fault (if it is) ), and will not recieve any financial benefit from the sale of the property.

Further to which, I really would put in place a robust complaint to the lender regarding this stinker of a mess - indeed I would state the resolution to be their payment of any CGT liability Mum is exposed to as a result of their quite horrific error (if beneficial ownership aspect can't be used to mitigate) !!

( Re benefical ownership aspect, speak to a tax advisor/accountant as to if this can be applied effectively in reverse to the general way of applying it, and if so, how this may be demonstrated to HMRC. Or indeed call HMRC directly and see what their guidance is, once they have all the facts to hand. )

Hope this helps and hope you get it sorted for Mum !

Holly

getmore4less

guarantor means to are accepting the same responsibility as if you were on the mortgage.

easier for the lender to make the mortgage joint but not the ownership and you would have know at the time she would have had to sign the mortgage docs.

check the deeds.

You would have signed the land registry transfer did you mum sign that as well?