Paying off my girlfriends mortgage on "our" house

Stupots

Hi, I have been overpaying on my mortgage(s) since Martin and MSE brought the saving to my attention 7 or 8 years ago. I think this is the first time I've come seeking advice directly with a post. :think:

The Situation
I have a house in my name that I used to live in which I now rent to Students. I re-mortgaged this with a buy-to-let mortgage to free up some of the equity, to then use to pay towards my girlfriends mortgage on the house we live in together.
House “Mine” is worth £140K and was re-mortgaged under my name for £105K.
House “Hers” is worth £190K with a £142K mortgage under her name with £102K remaining.

On Mine, I am just letting the rent pay for the 15 year mortgage; I roughly break even.
On Hers, we end our 2 year fixed deal next week, which has limited us to over-paying only 10% per year. I have paid this in a single payment each year so far. She used £48K equity from a previous house sale to put down on this house, so with the £26K I have already paid (2 years 10% overpayments), I need to pay another £22K to match her £48K investment. Next week I plan to pay £52K and she plans to pay £30K, this will mean we have both paid £78K as well as jointly paying the monthly payments on the mortgage. We will be left with a variable base rate mortgage with no overpayment limits of around £20K, which we plan to jointly pay off in the next 7 months.
We have a joint account we pay an equal sum into which we use for bills/food, but currently the mortgage payments come out of her own account, which I transfer 50% of the mortgage payment to monthly.

I will be completing my first tax return on my property in January.

The Advice
I’m after advice on is it wise to keep the mortgages in separate names? Is the money I have used/will use to pay her mortgage on what is effectively our house (in her name) subject to any kind of tax, or am I free to do this. From the situation above are there any other gotchas?
I would really value some feedback from the experts or people in a similar situation?

Thanks

Stu

Any

This post really either belongs to cutting tax or mortgages section...
My bet would be cutting tax as there are tax experts there for tax advice, although on mortgages you might meet people in similar situation.

lika_86

So, if I understand this correctly, you've paid £26k into the equity of a property you have no legal interest in, owned by someone who you aren't married to?!

And next week you want to put in another £52k?!

It's not effectively 'our house', it's her house. If you two broke up tomorrow or (in the absence of a will naming you as beneficiary) she died, you get nothing.

Stupots

Thanks Any, I see those would have been more appropriate for this now, I guess I thought all were about money saving and this title appeared to be the best fit, but I see now this forum also has more general marriage, relationship and family threads. Maybe a Moderator can move it?


Yes Lika, that is the kind of thing I need advice on. So what am I best doing... adding my name to the mortgage (would be my 2nd), both of us writing a will (yes I know we should both have one already) and/or getting a solicitor's letter drawn up specifying interests?


Thanks all in advance


Stu

lika_86

Firstly, don't pay any more money into the property without sorting this out properly.

You need to get onto the title deeds of the house. This is going to require a solicitor and will require either the consent of the mortgage lender to you also going onto the mortgage or a remortgage.

You'll need to speak to your girlfriend about this first, would she be agreeable to that?

Stupots

Thanks Lika, yes, she's very fair and we've already talked about how best to resolve it and I have mentioned that I would try posting on here for advice to get us pointed in the right direction.


I didn't know of there were any implications about being named on more than 1 mortgage? I guess, if I was and all went to plan, It would only be for 7 months or so anyway.


So, we need to speak to a solicitor and our Bank and see if I can be added to the existing mortgage and deeds; I'm hoping in that case they wont make us re-mortgage.


Stu

rpc

You have four options as I see it

1 - deed of trust
2 - stop putting money into an asset that isn't yours
3 - transfer of ownership and remortgage into joint names (JT or TIC)
4 - wife her

cte1111

If you are going to pay off the remaining mortgage within 7 months, then it might be simplest to leave it in your girlfriend's name for now. Once the house is now longer subject to any charges, transfer it into joint names. This can be done with forms from the Land Registry.

Definitely sort out wills ASAP though.

The main tax consideration is the capital gains tax liability when you eventually sell the BTL property. The period that you lived in the property will be free of CGT, as will the last 36 months of ownership. These two period added up together make your total Private Residence Relief. There will also be letting relief available, which is the lower of:

£40,000
the actual gain during the let period
the total amount of Private Residence Relief

To find the taxable gain, work out the total capital gain, e.g. sale price - purchase price - cost of any any capital improvements (not wear and tear). Then work out the Private Residence Relief and Letting relief. You will then be left with the taxable gain. You will have an annual exempt amount, currently £10,900. The rest will be taxed.

If you get married at some point, then it might be worth putting the BTL property in joint names too. You can then also take advantage of your spouse's CGT allowance.

cte1111

NB: there are no tax implications about you paying into your girlfriend's mortgage.

zcrat41

Propose!!!

itsanne

The biggest issue is that you have a lot of money tied up in something which you have no legal right to and are contemplating adding more to that. Much as I'd like to assume that you won't find yourself separated and unable to access money which you have "invested", other people have found themselves in exactly that situation. Equally, if your girlfriend doesn't have a will and the unthinkable should happen, you have no right to the money you have already paid out. You need to address these issues before spending any more on your girlfriend's house!

Once that's done, there will be people much better able to advise on the other aspects than I am!