Buying a house after separation...

Japes

My partner and I have lived together for 20 years. We have parted, and are fortunate to be still great friends. We own a home jointly together - value £450k, mortgage £200k so equity of £245k. Mortgage is in both our names.

She wishes to stay in the property, which I have no issue with.

Separately to this, my Mum passed away in 2011, leaving the old family home to myself and my brother. He has been living in the property ever since, slowly doing it up to sell - a long and complex story but the essential fact is it is now on the market and hopefully selling soon. I plan to take my share of the proceeds (which is a likely to be a few thousand shy of the equity in my ex and I's home, but that is fine by me) and buy a property for myself... but I am beginning to see that my ex and I could be in for unforeseen expenditure. If she stays in the home we jointly own and I come off the mortgage (assuming she can take it on alone) then it looks like she'd be liable for Stamp Duty. If I remain on the mortgage I'd effectively be buying a second home, hence liable for the increased SDLT on that...

Is there any way around this complex muddle? It seemed relatively simple when we initially agreed to separate. One good thing is that she is very open to the best possible solution for us both...

Thanks in advance...

noh

If she is able to take over the £200k mortgage and the ownership of the house is transferred to her name then the SDLT due will be £1500. Is that a problem?

Japes

noh wrote: »

If she is able to take over the £200k mortgage and the ownership of the house is transferred to her name then the SDLT due will be £1500. Is that a problem?

Not really, just unforseen and a bit of a pain. We'd likely split it anyway, as it would save me £££ on second home SDLT. Not as much as I had feared, either...

Tom99

noh wrote: »

If she is able to take over the £200k mortgage and the ownership of the house is transferred to her name then the SDLT due will be £1500. Is that a problem?

The partner is taking over half the mortgage, not all of it, so stamp duty on £100k should be £nil.

bowlhead99

Tom99 wrote: »

The partner is taking over half the mortgage, not all of it, so stamp duty on £100k should be £nil.

But presumably, without saying it, the OP also expects to be paid something for their share of the equity in the property, in addition to being relieved of the mortgage obligation?

They want to get rid of their interest in the former property so that they have no stamp duty obligation for themselves when they buy a new place, by making sure they don't own two places at once. OP can let their ex take over their half of the mortgage obligation on the property which as you say, being relieved of that debt is consideration of £100k. If the rest of the equity is gifted to the ex for free, her consideration on that part will be £0k, so the value transferred as far as the stamp duty people are concerned is £100k +£0k = £100k, which is below the threshold.

That seems quite a nice arrangement for the ex who gets the OP off the mortgage and takes over full ownership of a £450k property simply by taking over OP's share of £100k of existing mortgage and not having to pay anything for the equity. Nice work if you can get it - maybe that's fair if the OP never historically paid towards the equity or any of the mortgage principal.

However, I had assumed that "getting OP off the mortgage" and off the deeds of the house (to ensure OP didn't own two properties at once) was going to involve the ex raising sufficient new mortgage to pay OP some cash for their half of the equity as well as take over OP's existing mortgage. Thus leaving ex with £125k equity and her £100k share of original mortgage and OP's £100k share of original mortgage she took over and OP's £100k equity bought by taking out £100k extra borrowing. Her total borrowings would then be £325k (72% loan to value) while OP no longer has the mortgage obligation or the interest in £225k of property.

By doing that, the ex has acquired OP's £225k interest in the £450k house by letting them off the £100k mortgage and paying them off £125k for the equity funded by a new loan. Total value transferred £225k, total stamp duty due £2k. If OP wants the stamp duty on exiting the joint property to be lower than £2k they will have to accept less than £225k in full and final settlement for their share of that property. If they don't dispose of their entire interest in that property (because, for example, they aren't willing to give their equity away for free and the ex can't raise a mortgage to buy it on top of the £200k mortgage she'll have if she takes over OP's £100k share) then the OP will still retain an interest in the property. And then incur the extra rate stamp duty when buying a second place.

It would probably help if OP clarified what if anything they wanted paying for their old property (other than being relieved of their share of the mortgage on it) and then someone could do the stamp duty calc. OP said that Noh's calculation was lower than they had expected, which is I think because Noh's is wrong. The figures that make sense to me are a) £2k stamp on buying out the £225k half of property, by relieving OP of their mortgage obligation and giving them done cash for the equity; or b) £0 stamp on taking over the £100k of property currently supported by OP's share of the mortgage and being given all OP's equity for free so OP walks away with nothing.

SDLT_Geek

So the old family home is to be sold, you will receive your share and use the money to buy another property to live in as your only residence, whilst perhaps retaining a half share in the jointly owned home your ex partner lives in.

If you used to live in the old family home as your only or main residence, even many many years ago, the exception from the surcharge for the replacement of an only or main residence should apply to the purchase, so long as you complete the purchase by 26 November 2018 (after that date the three year rules apply).

Another point: other posters assume that you would let your ex have your joint home so long as you are released from the mortgage. Is that right, or would you also expect to be paid your half of the equity? It affects the amount of SDLT she pays.