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    • kelloggs36
    • By kelloggs36 12th Oct 18, 9:39 PM
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    kelloggs36
    Inherited house and buying out
    • #1
    • 12th Oct 18, 9:39 PM
    Inherited house and buying out 12th Oct 18 at 9:39 PM
    I hope you lot can help me! My mum died back in August and bequeathed her property (less an amount for grandchildren) to my sister and myself. Just weeks prior to this, she 'gave' my sister 50k as a deposit to purchase a house which was due to complete next week. However, her mortgage company have now decided at the 11th hour that they want another 12k deposit before they will lend her the money which she does not have at present. My mum made it clear (but did not have time to put it in her will, so I know I have to trust my sister) that the 50k deposit was to be 'put back' so to speak upon her death so that my sister effectively inherits 50k less and I get that 50k. The plan was that we would sell the house - valued at 325k - that I would get 50k and then we would split the remainder in half so that we were 100% equal. Because the mortgage company are now making new demands which threaten to scupper her purchase (it will as the house is not under offer and there is no sign of the money becoming available any time soon), my sister has suggested that she buy me out of the house which I am happy about.

    I want to know whether any lender would want to do the usual searches etc that they would normally do upon lending and how different the conveyancing procedure would be in this situation? The amount she needs to borrow is 187,500 which is the agreement as outlined above. I know she would need to ask her lender whether they would transfer the offer to the new property taking into account that she actually now needs to borrow 22k less than she needed when buying the house. The house has not yet been re-registered into our names so do we need to do that first with a specific portion share or can she just buy it without it being transferred first? We have probate already and we are both executors of mum's will.


    I hope this makes sense.
Page 1
    • G_M
    • By G_M 12th Oct 18, 10:49 PM
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    G_M
    • #2
    • 12th Oct 18, 10:49 PM
    • #2
    • 12th Oct 18, 10:49 PM
    As joint Executors you can transfer the property into your sister's name. You do not need to register it first in the Executors' names, nor in the names of the joint Beneficiaries of the will.

    As I understand it, she needs to pay you 212500 (325000 / 2 + 50000).

    To do this she needs to borrow 187,500 in the form of a mortgage and presumably has the remaining 25,000 to give you in the form of savings?

    Yes, the lender will want
    * the usual searches and Valuation (they still need to be sure it's a safe loan!)
    * a solicitor to oversee the transfer and registration of the property and their Charge over it
    • kelloggs36
    • By kelloggs36 12th Oct 18, 10:52 PM
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    kelloggs36
    • #3
    • 12th Oct 18, 10:52 PM
    • #3
    • 12th Oct 18, 10:52 PM
    I have worked it out a different way: House value 325k. I take the first 50k and then the remaining amount is split between the 2 of us, so therefore I get 187500 and she gets 137500.
    • G_M
    • By G_M 12th Oct 18, 11:33 PM
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    G_M
    • #4
    • 12th Oct 18, 11:33 PM
    • #4
    • 12th Oct 18, 11:33 PM
    Hmmm.. Or

    Mum lent your sister 50,000.
    Your sister owes mum's Estate 50,000
    So the value of mum's Estate for Probate is 325,000 + 50,000 = 375,000
    (assuming no other assets).
    So you each inherit 375/2 = 187,500 once sister has repaid the 50,000 she owes.....
    • kelloggs36
    • By kelloggs36 12th Oct 18, 11:46 PM
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    • #5
    • 12th Oct 18, 11:46 PM
    • #5
    • 12th Oct 18, 11:46 PM
    Nut she isn't repaying it in reality so we are looking at it so that I take 50k out so now we have both had 50k and then we split the rest.
    • kelloggs36
    • By kelloggs36 12th Oct 18, 11:48 PM
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    • #6
    • 12th Oct 18, 11:48 PM
    • #6
    • 12th Oct 18, 11:48 PM
    Which means we have both had 187500 each.
    • Tom99
    • By Tom99 13th Oct 18, 2:55 AM
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    • #7
    • 13th Oct 18, 2:55 AM
    • #7
    • 13th Oct 18, 2:55 AM
    I have worked it out a different way: House value 325k. I take the first 50k and then the remaining amount is split between the 2 of us, so therefore I get 187500 and she gets 137500.
    Originally posted by kelloggs36
    That's correct, sister buys your share of house for 187,500.

    Or looked at another way sister buys your half at 325/2=162.5 then gives you half the cash gift she already has 50/2 = 25. Total the same 187.5K
    • kelloggs36
    • By kelloggs36 13th Oct 18, 8:10 AM
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    kelloggs36
    • #8
    • 13th Oct 18, 8:10 AM
    • #8
    • 13th Oct 18, 8:10 AM
    The main worru is that she won't be able to. I am hoping tjat as the mortgage co offered her 196k now and she only needs 187500 that they will just go ahead. I was wonderimg whether the conveyancing would be exactly the same as she owns half already.
    • Tom99
    • By Tom99 13th Oct 18, 8:22 AM
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    • #9
    • 13th Oct 18, 8:22 AM
    • #9
    • 13th Oct 18, 8:22 AM
    Why does she need to borrow 187.5K, what happens to the 50k cash?
    187.5k to you, less 50k she already has = 137.5k mortgage?
    • kelloggs36
    • By kelloggs36 13th Oct 18, 11:35 AM
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    kelloggs36
    She has had 50k so my mum wanted me both to have equal shares of her estate. Tjerefore, from the estate I get 50k and then what is left is split equally. If she only had 137500 then I would not get my 50k. It has to come from the property as there is not enough cash elsewhere to take it from. She keeps the cash she jas already got.
    • yoshiyella
    • By yoshiyella 13th Oct 18, 11:42 AM
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    yoshiyella
    She has had 50k so my mum wanted me both to have equal shares of her estate. Tjerefore, from the estate I get 50k and then what is left is split equally. If she only had 137500 then I would not get my 50k. It has to come from the property as there is not enough cash elsewhere to take it from. She keeps the cash she jas already got.
    Originally posted by kelloggs36

    She gets 137,500 mortgage and uses the 50K deposit.


    Both of which would then go to you
    • p00hsticks
    • By p00hsticks 13th Oct 18, 12:12 PM
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    p00hsticks
    It has to come from the property as there is not enough cash elsewhere to take it from.
    Originally posted by kelloggs36

    So where's the 50k cash that your mother gave her ? I think you are double counting it somehere.

    Would it be easier if you think of it this way.....

    She gives you half (25k) of the 50k cash she has already received (and presumably is sitting in her bank account somewhere), so you're all square cash-wise, as you both now have 25k cash.

    She then needs to buys your half of the 325k house from you.
    Half of 325k is 162,500.

    BUT she has 25k in cash left to use as a deposit (which the lender will want to see), meaning she only needs to get a mortgage of 137,500.

    She uses the 137,500 mortgage money and her 25k of cash to pay you the 162,500 for your half of the house. Sorted.
    Last edited by p00hsticks; 13-10-2018 at 12:15 PM.
    • AdrianC
    • By AdrianC 13th Oct 18, 1:15 PM
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    AdrianC
    Hmmm.. Or

    Mum lent your sister 50,000.
    Your sister owes mum's Estate 50,000
    So the value of mum's Estate for Probate is 325,000 + 50,000 = 375,000
    (assuming no other assets).
    So you each inherit 375/2 = 187,500 once sister has repaid the 50,000 she owes.....
    Originally posted by G_M
    ^ This.


    The 50k from your mother was a loan. It's an asset of the estate.

    Your sister does not need to physically repay it, it's simply for accounting purposes. Let's say she hands an IOU in...

    325k + 50k IOU = 375k
    50% 375k = 187,500
    You get 187,500.
    Your sister gets 137,500 plus her 50k IOU back.

    So to buy the house from the estate, the estate signs the house to you, and you pay sister 137,500.

    Obviously, any other assets are distributed by the estate on top of that, 50/50. If there's another 50k in assets, you may wish to forego your 25k worth, and offset that against the payment you make to your sister, so you pay her 112,500 for her 50% of the property.
    • kelloggs36
    • By kelloggs36 13th Oct 18, 1:30 PM
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    kelloggs36
    No. She is keeping the 50k. Therefore she needs to access 25k to add to my half. So she borrows my half value of 162500 which ignores the 50k she has. She then borrows an extra 25k rather than ise the cash that she has. Therefore I get 187500 which is the same as her mortgage as the deposit is her half of the house of 167500.
    • AdrianC
    • By AdrianC 13th Oct 18, 2:14 PM
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    AdrianC
    Either the 50k was an unreserved gift - in which case, she doesn't need to "pay it back" to make your "inheritances level" - or it was a loan. It can't be both. Either way, because of the short timescale, it counts as part of the estate for IHT purposes - if it was longer, it'd tail off annually over 7 years, but <1yr counts as 100%.


    She doesn't need to physically pay it back, just to metaphorically put a 50k IOU in the pot.
    • kelloggs36
    • By kelloggs36 13th Oct 18, 2:52 PM
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    kelloggs36
    I declared ot on the probate forms and no inheritence tax to pay. I think we are in agreement as the figure of 187500 is what I calculated which includes 25k she has borrowed rather than pay it back.

    My question was more about the process than the amount and how, if at all, it differed from a normal purchase. Ie do we have to put it in our names first or not?
    • AdrianC
    • By AdrianC 13th Oct 18, 2:56 PM
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    AdrianC
    The executors simply transfer it all to one beneficiary, and the two beneficiaries settle the cash between themselves.
    • Tom99
    • By Tom99 13th Oct 18, 3:01 PM
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    Tom99
    No. She is keeping the 50k. Therefore she needs to access 25k to add to my half. So she borrows my half value of 162500 which ignores the 50k she has. She then borrows an extra 25k rather than ise the cash that she has. Therefore I get 187500 which is the same as her mortgage as the deposit is her half of the house of 167500.
    Originally posted by kelloggs36

    I can't follow your logic. If she borrows 162.5K plus an extra 25k to pay you 187.5K she will be left with 50k in her pocket?
    • kelloggs36
    • By kelloggs36 13th Oct 18, 3:19 PM
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    kelloggs36
    Yes and half the house plus she will have bought the other half. We both end up with a value of 187500. If we sold externally, from the proceeds of the sale I would get 187500 and she would keep her 50k and her share of the house making her share 187500. It is because she getting a mortgage and choosing to keep the 50k that she has to borrow an extra 25k to give to me.
    Last edited by kelloggs36; 13-10-2018 at 3:23 PM.
    • kelloggs36
    • By kelloggs36 13th Oct 18, 3:20 PM
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    kelloggs36
    The executors simply transfer it all to one beneficiary, and the two beneficiaries settle the cash between themselves.
    Originally posted by AdrianC
    Will the mortgage lender not want to do all the necessary searches like normal though as the money is secured against the house?
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