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How much to buy out each other regarding properties etc....big headache!!


Hi all. I wonder if anyone can give advice as it's all a bit of a headache! My ex-wife and I have been divorced for sixteen years but never really settled financially. At the time of divorce, we owned two properties. A property 200 miles away that we rented out was in both names, it’s now worth £200k and has no mortgage. Upon divorce, that property was placed in my name only, and I have always rented it out (to my mother).
Ex was supposed to keep the family home, now worth £500K with a 75K interest-only mortgage due to finish in three years (but with no endowment as we cashed that in. I could probably pay that off with my savings though) and place it in her name only. The problem was she couldn’t get a mortgage in her name only, so I am still on the mortgage and the deeds.
So, we now want to settle up and go halves (even though the smaller house is legally mine, morally it’s both ours) I have probably spent approx. £25k total in maintenance on both properties.
We are both 66 years old and retired, and living on state pensions only. She lives away in an unrelated property owned by her partner. I moved back into the larger house five years ago. For personal reasons, ex doesn’t mind moving back into the smaller house but only in the short term before selling it.
Basically, what I would like to know, roughly what would be the figure to buy her out? I get headaches thinking of the capital gains, how does the maintenance I’ve paid out, fit in, etc!!
Any help would be appreciated!
Comments
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It seems pretty simple which probably means I don't understand the question!Two properties, £200k and £500k, total £700k. That's £350k each. Whoever keeps the £500k one needs to give £150k to the other.N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 34 MWh generated, long-term average 2.6 Os.Not exactly back from my break, but dipping in and out of the forum.Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!0 -
But what about the 75K mortgage outstanding, and the at least £33k Capital Gains tax, plus the fees, and maintenance. I don't think we can sign over the £200K house without there being Capital Gains liable?
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By one point of view, you're overcomplicating it; OK you've spent the maintenance money but you've had beneficial use of the larger house for the past five years, and haven't been paying the ex rent(?) so you're probably up on the deal.And it could be argued that CGT shouldn't even come into it, it's irrelevant to the question.As for the mortgage, you could treat it as reducing the value of the property by £75k. Total value is therefore £625k, £312.5k each, so whoever keept the larger house repays the mortgage plus pays the smaller house person £112.5k.N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 34 MWh generated, long-term average 2.6 Os.Not exactly back from my break, but dipping in and out of the forum.Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!0 -
Thanks for replying QrizB, it is appreciated. Ex is the one who wants the smaller house, but only in the short term. I was under the impression, as it is in my name, if she moves into it, and the Deeds get transferred into her name (when she moves in).....I have to pay CGT at that point, which is £33k. I get that if I keep the larger house, and pay the mortgage off myself, then the payment would be the smaller house plus £112.5......but would she not be liable for half the CGT as well.....so I could take that off the £112.5?
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I'm not a CGT expert, sorry; you might get a more useful answer over on the "housing" forum!I can see how you might incur a capital gain when you transfer the smaller property to your ex; will she not also incur a gain when she transfers her share (half?) of the larger property to you?N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 34 MWh generated, long-term average 2.6 Os.Not exactly back from my break, but dipping in and out of the forum.Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!0 -
Cad169 said:Thanks for replying QrizB, it is appreciated. Ex is the one who wants the smaller house, but only in the short term. I was under the impression, as it is in my name, if she moves into it, and the Deeds get transferred into her name (when she moves in).....I have to pay CGT at that point, which is £33k. I get that if I keep the larger house, and pay the mortgage off myself, then the payment would be the smaller house plus £112.5......but would she not be liable for half the CGT as well.....so I could take that off the £112.5?0
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Hi, thanks Keep Peddling. The small house is £200k but we bought 25 years ago at £43k. All the CG calculators tell me is going to be around £33k? The original idea was for me to swap over names on the small house Deeds to hers from mine.....and to take her off the deeds to the big house so that becomes mine, by buying her out. The other worry now is QrizB's suggestion that if I do that, there may be CGT and stamp duty to pay on that property!!The suggestion that you just add the two market prices and divide by two sounds a little simplistic when the houses, in real terms might not be worth the market value at all?I think I might need to wander over to the Housing forums1
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Firstly have you got up-to-date estate agent valuations on the properties- I would suggest 3 valuations.
Secondly regards CGT (especially with the rented property) - I would suggest employing an accountant firm to help you with completing any forms. I had a rented property I sold and using a proper accountant the CGT was reduced due to improvements I had made to the property. Only certain improvements are taken into account however but may be worth talking to an accountant? Was it always a rental, or was it a home for one of you ever? Again mitigation against full CGT.
Thirdly - one of these properties was the domicile of your ex-wife. Therefore depending on who registered to on Land Registry if it was their home then CGT isn't applicable.0
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