Remortgage and adding my name to title - need help!

consultantuk29

Hi,

I currently live in my sister's property which is solely in her name, bought in August 2004 for £300,000. The property is now worth £600,000. We have always had a verbal understanding that we own this property in equal shares (50/50) and I have been paying the interest only mortgage (buy-to-let) on it for the last 6 years. Before that my mother was paying the mortgage, but I resided with her in the property (so always been a tenant)

We now want to switch the mortgage to a repayment one and also add my name to the mortgage and title deeds. What is the most tax efficient way of doing this? The outstanding loan on the property is £244,000.

I presume cheapest option is to do a simple remortgage with my name in it, the 'consideration' I will be paying is half the mortgage amount i.e. £122,000 and SDLT will be payable on that?

Lastly, what if I want to remortgage and take extra loan out? so £300,000 mortgage (as property value is high now) Do I Pay SDLT on £150,000 then?

Will appreciate any help on this.

amnblog

This is not just about SDLT.


Your sister could be clobbered with a CGT bill here.


Consult a qualified Accountant.

consultantuk29

Thanks. I was just looking up the CGT and not sure how that might be applicable.

Any advise on how much might be payable?

kingstreet

She would be disposing of 50% of an asset valued at £600,000 which cost £300,000, so a gain of £300,000.

CGT information and calculation help here;-

https://www.gov.uk/tax-sell-property/what-you-pay-it-on

consultantuk29

amnblog wrote: »

This is not just about SDLT.


Your sister could be clobbered with a CGT bill here.


Consult a qualified Accountant.

---

Thanks for reply.

The way I calculated that no CGT is payable is as below:

Current property value = £600,000
Transfer value (Sale value) = £300,000 (50%)
Purchase price = £287,000
Lawyer fees/Stamp duty at time of purchase = £10,000+ approx

Capital Gain = £300,000 - 287,000 - 10,000 = £3,000 (hence no CGT payable)

Would appreciate any comments on this - am I calculating this correctly?

consultantuk29

kingstreet wrote: »

She would be disposing of 50% of an asset valued at £600,000 which cost £300,000, so a gain of £300,000.

CGT information and calculation help here;-

---

Thanks for reply.

The way I calculated that no CGT is payable is as below:

Current property value = £600,000
Transfer value (Sale value) = £300,000 (50%)
Purchase price = £287,000
Lawyer fees/Stamp duty at time of purchase = £10,000+ approx

Capital Gain = £300,000 - 287,000 - 10,000 = £3,000 (hence no CGT payable)

Would appreciate any comments on this - am I calculating this correctly?

kingstreet

CGT isn't like stamp duty.

It's based on the actual value of the property, not the below-value figure you've agreed.

Seek professional help, as suggested.

consultantuk29

kingstreet wrote: »

CGT isn't like stamp duty.

It's based on the actual value of the property, not the below-value figure you've agreed.

Seek professional help, as suggested.

Ok thanks. I don't think you mis-understood the question on CGT.

I understand the CGT is calculated on the market value, but if she is only giving 50% of the property away, her gain cannot be 100% of the additional value? i.e. her gain is £150,000 (half the value of her gain) not £300,000. - or am I missing the point completely here! :S

Foxy-Stoat_3

consultantuk29 wrote: »

Ok thanks. I don't think you mis-understood the question on CGT.

I understand the CGT is calculated on the market value, but if she is only giving 50% of the property away, her gain cannot be 100% of the additional value? i.e. her gain is £150,000 (half the value of her gain) not £300,000. - or am I missing the point completely here! :S

I agree, I dont think Kingstreet hasn't mis-understood at all.

Yes, you are completely missing the point here !

kingstreet

Not my area of expertise, hence reinforcement of advice to get professional help, but;-

£600,000 value
£300,000 purchase price

________

£300,000 gain

£150,000 percentage of value/gain being disposed of less
£10,000 annual gains exemption
________

£140,000 taxable gain.

This is broadly what I expect.

consultantuk29

kingstreet wrote: »

Not my area of expertise, hence reinforcement of advice to get professional help, but;-

£600,000 value
£300,000 purchase price

________

£300,000 gain

£150,000 percentage of value/gain being disposed of less
£10,000 annual gains exemption
________

£140,000 taxable gain.

This is broadly what I expect.

Great. That makes more sense. I certainly will seek professional help, but wanted to get some rough calcs to have an idea.

One last question, considering this is her only property (and she lived in this for the first year of ownership), even though it is on a buy-to-let mortgage - will she get any Private Residence Relief? Lettings Relief?

On professional advice - who should I get in touch with? An accountant or lawyer? Any idea of typical cost for this? Where to look?