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Equity Transfer followed by new Mortgage Required
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BrettCollins
Posts: 4 Newbie
We have buy to let owned equally by myself, my wife and her son.
We are transferring ownership of property via an equity transfer to my wife's son and his girlfriend.
Once this has been done they will need to get a mortgage to pay myself and my wife our share of equity. I have been told that they will not be able to get a mortgage for six months after the equity transfer.
Is this true of most or all lenders?
When looking for mortgages what should they be looking for? First time buyer mortgage, home buyer mortgage, remortgage.
We could just sell them the property but then my wife's son would have to pay capital gains tax. If there is no way round the six month delay we will have to assess what we would loose because we would not have an investment income from the cash from mortgage compared with capital gains tax my wife's son would have to pay.
We are transferring ownership of property via an equity transfer to my wife's son and his girlfriend.
Once this has been done they will need to get a mortgage to pay myself and my wife our share of equity. I have been told that they will not be able to get a mortgage for six months after the equity transfer.
Is this true of most or all lenders?
When looking for mortgages what should they be looking for? First time buyer mortgage, home buyer mortgage, remortgage.
We could just sell them the property but then my wife's son would have to pay capital gains tax. If there is no way round the six month delay we will have to assess what we would loose because we would not have an investment income from the cash from mortgage compared with capital gains tax my wife's son would have to pay.
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Comments
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You should be able to do the transfer of equity at the same time as the mortgage.
Which ever way you look at it, your son is buying out your shares and not touching his share, so there is no CGT now, though there may be in the future due to the time it was not his home.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
BrettCollins wrote: »We could just sell them the property but then my wife's son would have to pay capital gains tax.
Avoidance is somewhat futile. Suggest you seek professional advice. Rather than incur unneccesary cost.0 -
Doing and equity transfer and remortgaging at the same time was the original idea but the lenders do not like this because my wife's son and girlfriend are not married. We could do the transfer to my son alone but he does not have sufficient salary and credit rating to get a mortgage.
So by paying existing mortgage off we can do the equity transfer to both of them, but then it appears they have to wait 6 months before they can get a mortgage.0 -
Have you considered the potential CGT liability (on you, not on your son) that will result from transferring the equity to him?0
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There are guarantor mortgages, where you could guarantee the mortgage for your son to take out alone. There are also mortgages where you deposit some savings with the lender.
Forget the tax issue of "selling" to your son. He is a part owner now and remains so.If there is no way round the six month delay we will have to assess what we would loose because we would not have an investment income from the cash from mortgage
Is this so crucial? If so, then the son or GF could pay you in the short term, after all they won't have a mortgage to pay in that time.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
BrettCollins wrote: »Doing and equity transfer and remortgaging at the same time was the original idea but the lenders do not like this because my wife's son and girlfriend are not married.0
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Thanks for suggestions so far, here are my replies:
We are aware myself and my wife will have to pay CGT with the equity transfer but compared to the profit we make selling our share this is not a problem.
I will look a the guarantor mortgage option but if that means they have to pay a higher interest rate we would need to assess if that is a good idea. The girl friend has a good salary and if they were buying a property together they should have no problem getting a mortgage.
It was a solicitor that explained what we needed was an equity transfer and re-mortgage, they are waiting for the go ahead on this. They are going to charge about £850 for this, if we do it as a sale and a purchase we would need two solicitors as I believe solicitors cannot act for seller and purchaser of same property. So solicitor costs are very likely to be much higher.0
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