Buying my partners sister out of a joint mortgage

Naughtydog

Hi all,

Allow me to explain the scenario because it’s not a simple one.

My partner and his sister bought a flat together, it was a shared ownership purchase meaning they owned 50% mortgage. 50% with housing association. They have lived there for 4 years together and his sister wants to buy a house with her partner. We have agreed that I will buy her out of her share of the property and will jointly own the flat with my partner. We received the mortgage offer from nationwide at the beginning of August, the mortgage for the property as well as her equity on top, which equates to £14,460.00.

We applied for the mortgage to be tenants in common, so me and my partner will have separate shares in the flat due to him living there longer. A deed of trust will be drawn up so when we do sell in the future his equity is protected.

So his sister is currently going through the process of buying a property with her partner, but I am unsure about when she will be getting her equity. She has told me she needs the equity so she can pay her half of the deposit for when her and her sellers solicitor exchange contracts, but due to us re-mortgaging and transferring her equity, when would she receive her money? Would it be on time for the exchange of contracts or when she completes? Also, when would I be able to move into the flat, would it be once the transfer of equity / completed or when she completes? Would these be done on the same day?

Also another one, if I am buying into the property for £100k would I qualify for stamp duty? Or does that not apply for a remortgage.

Got soo many questions. Any advice on this will be appreciated as I am worried she may not get her equity until she completes (which is later than her paying her deposit).

gettingtheresometime

If she needs her equity at the exchange stage of her purchase, wouldn't that mean the completion stage of her sale (aka your purchase) has be before then, or at least the same day?

As for moving in well if she's happy for you to move in before you complete I can't see a problem.

AnotherJoe

The money she needs for a deposit on her purchase at exchange would usually come from the deposit you place when you exchange on her flat. Have you been asked to provide one?

Otherwise she will need to find that from some other source because the equity in her flat isn't available to her until completion because thats when the mortgage lender provides the money. So unless its a same day exchange/complete she will need to find the exchange deposit herself if you arent paying it to her.
You can move into her flat whenever she allows you. You could move in today if she let you. I presume she is no longer living in it or there's room for all of you?
As you are a FTB and your share of the flat is well under the ?£300k limit i dont think there will be SDLT payable.

Yalpsmol

You're buying her out but you say you will have a different share to your partner. Did she not contribute 50%?

Naughtydog

That’s what I’m confused about, can we complete our transfer and re-mortgage before she exchanges contracts or does it have to be done in the same day? Sorry I’m a FTB and new to this process so no idea how it would work. I’m sure she said she needs the equity so she can buy the house. Is there a way we can organise for her to get her equity at the time of exchanging contracts or must it be on the same day?

Naughtydog

Yalpsmol - her and her brother bought the property 50/50. I’m buying her out but my partner has been living there longer therefore has an equity of £14,640.00 in the property. Since he has more equity, he owns more of the property (especially as we are tenants in common). Is that not correct?

AnotherJoe

I am mystified as to how they could start off 50/50 and not end up 50/50, what happened?

Tom99

AnotherJoe wrote: »

I am mystified as to how they could start off 50/50 and not end up 50/50, what happened?

Because the OP is not putting in the cash needed to buy out the sister. The £14,460 needed is being added to the mortgage the OP and partner will be jointly responsible for so in effect the OP's partner is putting in £7,230 on top of the 50% they already own.

AnotherJoe

Tom99 wrote: »

Because the OP is not putting in the cash needed to buy out the sister. The £14,460 needed is being added to the mortgage the OP and partner will be jointly responsible for so in effect the OP's partner is putting in £7,230 on top of the 50% they already own.

Good explanation but that doesnt mean that the sister and brother dont own 50/50, its the OP that is changing the %'s.
OP said it was because brother had "lived there longer".

gingercordial

There's no reason why you couldn't exchange and complete earlier - your purchase doesn't have to be chained with her purchase. Chains usually form because everyone is a stranger and all need to move on the same day.

If you do your purchase earlier does everyone involved have somewhere to live until sister and her partner buy? Can she move in with her partner at wherever he lives now?

Or can you, your partner and his sister all live together in the house temporarily? She will no longer own it during this period, but she will have the money and be in a good position to make her own purchase.

Of course your partner could just ask you to move in any time he likes even if you don't buy - his sister might not like it but probably couldn't stop it! Do you and the sister get along?

Naughtydog

Her partner is a lodger at the flat right now. So it’s her, my partner (her brother) and her partner all living in the same flat. I’m currently living back at home so I can save as much as I can for all the up front costs. I would love to move in straight away but she won’t allow it because it’ll be too cramped

So effectively we could exchange and complete in the same day, meaning she will get her equity in time to pay her deposit and move in on the same day? Am I right in saying this?