Transfer of equity advice please! 31 January 2020 at 9:42PM in House buying, renting & selling 5 replies 249 views

Houseymousey

Hi all!

Quite a complex query here so please bare with me :-)

My OH (Nemo) and I both own separate homes. Mine is a small one bed first home owned by just me, his is a larger first home owned jointly with his ex partner (Dory).

His ex (Dory) has been unable to buy him out of their home on her own - but she does pay the full mortgage payments so we have been making do. It’s all been amicable, no kids involved and she had asked for some time to save to buy him out which we both agreed was fair. (He lives with me in my wee one bed).

However, it has meant that now that my OH and I have started looking to sell my flat and buy somewhere larger together for ourselves, we have been struggling due to the higher stamp duty we’ll have to pay due to it being his second property (works out around £8k for a £200k house) plus the higher LTV (15-20% deposit as opposed to 5-10%). All in all we’ll need around £40k whereas if he wasn’t still on the old mortgage we’d need around half of that.

His ex (Dory) does has a new partner, and we are all looking into the new partner replacing my OH on the larger mortgage so that my OH can be mortgage free - and released from the hefty stamp duty and higher LTV.

My question is, when he is bought out, how does it work in regards to him getting his share of the deposit which he put into their family home back. The total deposit was around £15k and he will need his half back (£7.5k) to go towards our deposit (along with the proceeds from the sale of my one bed).

Also, will his ex’s partner who is buying him out be required to provide any type of deposit (I.e £7.5k) or is it a name swap on the deeds? No idea how it all works and wanted a general idea before we get mortgage advisors or solicitors involved.

Thanks in advance!

LOliverB

The ex will basically have to remortgage. For example if house was bought for £200k, now worth £250k and let’s say £150k left on mortgage - that leaves you with £100k equity to split. The ex in this scenario would pay £50k to buy out. So would have to remortgage for £200k, pay of existing mortgage and give £50k to your partner who she is buying out. It is simply not a matter of taking someone’s name of the mortgage , the bank will do a new mortgage application and all the affordability checks checks based on whoever’s name will now be on the mortgage. Hope that helps

Slithery

Houseymousey wrote: »

His ex (Dory) does has a new partner, and we are all looking into the new partner replacing my OH on the larger mortgage so that my OH can be mortgage free - and released from the hefty stamp duty and higher LTV.

You can't 'replace' one person with another on a mortgage. Dory and her partner will need to apply for a new mortgage in their names.

[Deleted User]

Houseymousey wrote: »

Hi all!

Quite a complex query here so please bare with me :-)

My OH (Nemo) and I both own separate homes. Mine is a small one bed first home owned by just me, his is a larger first home owned jointly with his ex partner (Dory).

His ex (Dory) has been unable to buy him out of their home on her own - but she does pay the full mortgage payments so we have been making do. It’s all been amicable, no kids involved and she had asked for some time to save to buy him out which we both agreed was fair. (He lives with me in my wee one bed).

However, it has meant that now that my OH and I have started looking to sell my flat and buy somewhere larger together for ourselves, we have been struggling due to the higher stamp duty we’ll have to pay due to it being his second property (works out around £8k for a £200k house) plus the higher LTV (15-20% deposit as opposed to 5-10%). All in all we’ll need around £40k whereas if he wasn’t still on the old mortgage we’d need around half of that.

His ex (Dory) does has a new partner, and we are all looking into the new partner replacing my OH on the larger mortgage so that my OH can be mortgage free - and released from the hefty stamp duty and higher LTV.

My question is, when he is bought out, how does it work in regards to him getting his share of the deposit which he put into their family home back. The total deposit was around £15k and he will need his half back (£7.5k) to go towards our deposit (along with the proceeds from the sale of my one bed).

Also, will his ex’s partner who is buying him out be required to provide any type of deposit (I.e £7.5k) or is it a name swap on the deeds? No idea how it all works and wanted a general idea before we get mortgage advisors or solicitors involved.

Thanks in advance!

You say 'ex partner' so I'm going to assume Nemo and Dory were not married. How is the property with Dory owned? Joint tenants, tenants in common, if tenants in common what is the split? Is there a Deed of Trust stating what will happen in respect to the deposit and/or in the event of a relationship breakdown?

Has Nemo worked out if there will be a Capital Gains Tax liability for disposing of his share of a property that is not is primary residence?

Dory and her new partner will need a deposit, that could be in the form of existing equity, to get a mortgage. I'm not sure if will be as straightforward or simply swapping Nemo for Dory's new partner on the mortgage or if Dory and her new partner will have to apply for a completely new mortgage. In any case the transfer of equity will be tied up with the new/change in mortgage.

Socajam

I noticed you said that his ex is paying the full mortgage.
How long has she done this and what is your partner's view on how much he is entitled to since the mortgage payments have been paid by his ex. - It is just the deposit or does he think he the profits should be pro rated from the time the ex started to pay the full mortgage.
These are things you need to think about.
I went through something similar to this, hence my question.

GDB2222

In case it’s not obvious, Dory and Nemo need to value the property they currently own. It’s unlikely to be worth exactly what they paid for it. They also need to think about the notional cost of selling, etc, and whether that should be factored in.

It’s not just half the deposit. If it was a new build, or they overpaid, it may be worth less than they paid for it, and Nemo may have to pay Dory, not the other way around.