Can I buy out my Dads share of a property?

Buyingahouse

My parents split up about 3 years ago and finalised their divorce in recent weeks. Subsequently my partner, daughter and I moved into my parents property and have been paying rent (the mortgage) for about 2 years. My Dad wants to sell the property and release his share of funds, my Mum however isn't particularly bothered about selling up. We have been planning on buying the property and have been waiting for a couple of glitches on our credit reports to clear prior to going through applications for a mortgage. Thankfully our credit reports are now in very good shape for us to move forward with the plan. However, I would like to look into the possibility of buying my Dads share of the property, meaning my Mum has a 50% share and my partner and I share the remaining 50% (or 25% each). The property is only worth around £110,000 with an outstanding mortgage of around £70,000. My parents would like to give us £10,000 worth of equity if we were to buy it, so I would like to think that the offer still stands if we were to just buy my Dads share. We would also like to remortgage some funds, as the property is in need of some work, ideally we would like to release approx £20,000 but understand that this might not be doable?

Would really appreciate any general advice for this situation, all four of us work full time, so gathering info online etc is proving to be most convenient at the moment! Thanks

Yorkie1

I don't think you can just buy a 50% share where there is an existing mortgage and you will need a mortgage too - i.e. you can't just pay your dad £35K for his 'half' of the mortgage and take over that 'half' of the mortgage.

The original mortgage in your M&Ds' names will need to be redeemed completely. If your mum is to remain in the property, she would need to be an applicant for your new mortgage along with you and your OH. All 3 of you would be on the deeds as well as the mortgage. This number of applicants might be problematic - perhaps.

Have you seen a broker to discuss this as it really isn't straightforward?

Annisele

Is the £10k gift from your parents from both of them equally, just from your Dad, or just from your Mum? Assuming everything is equal:

Your Dad currently has £20k equity, your Mum has £20k, and you have 0. You're wanting to put £15k into your Dad's hands, and have him walk away from the mortgage.

So, if you've no savings of your own, you'd need a joint mortgage for £85k (£70k to pay off the existing mortgage, and £15k for your Dad). On a property worth £110k that might be possible, subject to your Mum's age and the earnings and credit history of all parties.

If you're wanting to borrow another £20k, I don't think it's at all possible. You'd then need a mortgage of £105k against a £110k property, which I don't think you'd get. 95% LTV mortgages are just about possible for people with a squeaky clean credit history, but you're talking even more than 95%.

Buyingahouse

Agreed, it is a problematic set of circumstances. Firstly, both mum and dad don't reside at the property. And secondly we have not yet spoken with an advisor/broker.

I am thinking at this point that there are 2 possible ways forward with this -

A) the property gets refinanced with a new mortgage in the 3 names (mum, me and my partner) to include the release of funds to both pay my dad out and a bit of a refurb

my dads name gets removed from the existing mortgage and either both mine and my partners names or just my name gets put onto the mortgage. In this instance I would have to source the funds to buy my dad out alternatively, non inclusive of the mortgage

Option A is probably going to be the easiest (I would hope) and best option for clarity, but really unsure, hence why looking for advice

Buyingahouse

Could really do with some more advice - if anybody has any

Thanks in advance

RAS

You cannot remove dad's name from the mortgage, you will have to redeem it, so B is not an option.

Yorkie1

If your mum doesn't live at the property and won't in the future, I don't know whether that would itself cause difficulties in obtaining a joint mortgage with her.

I agree that B is not an option, for the reasons I and RAS previously gave.

YoungBusinessman

B is not an option. You can redeem the mortgage and reapply for as high as a LTV as possible(most likely one to get is 90%LTV) Cant see you remortgaging, buying out your dad and still having £20k in cash for repairs. Keep saving and buy him out when you can afford to do so?

kingstreet

Buyingahouse wrote: »

A) the property gets refinanced with a new mortgage in the 3 names (mum, me and my partner) to include the release of funds to both pay my dad out and a bit of a refurb

This is the only realistic option and this will be combined with a transfer of equity to remove your father from the ownership of the property, to be replaced by you and your partner with your mother remaining.

Watch the loan to value if capital raising and pay attention to the stamp duty issues;-

http://www.hmrc.gov.uk/sdlt/calculate/transfer-ownership.htm