Stamp duty saving when buying out a share in a house

Re: Parting Ways on Joint Ownership

I'm pretty certain we've had this discussion before. I have always argued with Revenue on this one. If I am buying my partner out then it is vital to take the mortgage into account. Otherwise I'd be paying tax on an asset without discounting the debit ataching to it.

In the past, Revenue have insisted that they will only calculate the duty based on equity only if the Lenders are joined in the Deed to release the borrower being bought out and to consent to the now total owner taking over the entire mortgage. I've successfully argued the case that if the now total owner is taking on a substantially bigger mortgage with a new lender ( i.e. who will not join in the Deed of Conveyance ) then the situation is the same.

"Otherwise, if I have a house worth €500k with a mortgage of €400k, could I not sell my equity and so the new owner would pay stamp duty on only €100k?"

It depends on what you are selling/buying. If you are selling your own house in your own name with your own mortgage, then you have to redeem your mortgage and the purchaser acquires the entire property mortgage free and will pay stamp duty on the value of the property. If you are selling a share in your house, then the purchaser will pay duty on the value of the share they are buying - but your lender will not let you sell any part of your house unless the new part owner becomes jointly responsible for your total mortgage or you redeem your mortgage.

I'll be interested to hear any of the other legal/tax practitioners views.

mf

Re: Parting Ways on Joint Ownership

MF1

I have spoken to the revenue again, in light of what you have said in your posts and they agreed with what you have said in relation to equity, only after I brought it up with them.

Other than that they say pay the SD on half the market value less €125k.

I now just need to confirm that the lenders are joined in the deed.

Thanks

MF

This very interseting, so can I clarify it.

A & B jointly own a house worth €400k.
They have a joint mortgage of €300k from the EBS.

Situation 1
A buys out B but keeps the same mortgage with the EBS. So A now owns 100% of the house and has 100% of the mortgage. The EBS somehow joins in the Deed of Conveyance?

The stamp duty is calculated on the payment of €50k.

Situation 2
The EBS refuses to give A a bigger mortgage, but First Active agrees. So the EBS is not involved in the Deed of Transfer.

The Revenue say that the stamp duty should be calculated on the €200k.

But you have argued successfully against this.

I am dying to hear if that has been successfully argued.

Is it not the case in all mortgages that the lender is joined in the deeds? Or is the deed of conveyance something different? Or is it a particular type of arrangement that must be set up when taking out the mortgage in the first place.

My solicitor just told me that it is very rare now that the lender will let you simply take on the full existing mortgage, and will make you take out a completely new mortgage, resulting in you having to pay the SD on the full half. If that is the case I will move it purely not to deal with them any more. Currently with PTSB.

In my case, I just want to take on the existing mortgage and simply remove the other party from it (not that simple, I know).

Luckily, I do not need to borrow anymore to buy him out but would struggle with an additional €6k in SD.

I'm confused



I am hoping to buy my partner out of our house that we jointly own.

• Bought 350k
• Current MV 380k
• Mortgage 310k

So how much Stamp Duty will i be liable to pay? I would be increasing
the Mortgage to 345k to buy Partner out.
ie: 380 - 310 = 70k, giving him 35k.


We owe the house 50/50. We were not FTBs.
The house would not sell in the current market.

Help!

Babycakes said:

I'm confused




I am hoping to buy my partner out of our house that we jointly own.

• Bought 350k
• Current MV 380k
• Mortgage 310k

So how much Stamp Duty will i be liable to pay? I would be increasing
the Mortgage to 345k to buy Partner out.
ie: 380 - 310 = 70k, giving him 35k.


We owe the house 50/50. We were not FTBs.
The house would not sell in the current market.

Help!

Click to expand...

If "the house would not sell in the current market" then how can the market price be €380K??????????

Make sure you get a few valuations you don't want to buying out you partner at any more or less than market price.

This is what other houses in the area are valued at and to be honest - I just want out - this is the best gauge at the moment and it was the scenario I wanted advice on - maybe I should have put assumed MV....

Thanks

Hi everyone

Has anyone any idea how the following situation will work out:

If X and Z own a house together but Z decides to go their separate way and remove their name off the mortgage leaving Z to pay the mortgage repayments. Will Z have to pay stamp duty?

There is no equity in the house. It's break even.

Apologies if this has been asked before as I am trying to understand all the implications.
Hi everyone

Thank you for you time.

Ireland.1 said:

Hi everyone

Has anyone any idea how the following situation will work out:

If X and Z own a house together but X decides to go their separate way and remove their name off the mortgage leaving Z to pay the mortgage repayments. Will Z have to pay stamp duty?

There is no equity in the house. It's break even.

Apologies if this has been asked before as I am trying to understand all the implications.
Hi everyone

Thank you for you time.

Click to expand...

I have corrected your post.

The bank won't let them do this. They will require that Z to obtain a new mortgage and pay off the existing mortgage and all the supplementary costs that involves.

I'd say it depends on circumstances but I know I didn't have to pay SD when I did this, however I think the solicitor has to put your case to revenue.

Thank you very much for your reply.

In circumstances like this do you think it is best the house is sold?

I don't know the circumstances of X and Y so I can't say. Both parties have to way up what is best for themselves and hopefuly come to an agreement.

I was in a fairly amicable situation inspite it being a break up (well a few years after a breakup). This helped a lot bringing it to a conclusion. The other factor was I was able to get a mortgage on my own, because if both of the parties involved are unable to do this then the point it moot.

A further issue is the current climate. How hard will it be to sell the house and what price is achievable. You say there is no equity, but are you certain that it is not in negative equity?

No I cannot be 100% certain the property is in negative equity. If one of the parties decides to apply too the bank to take over the mortgage - what is the procedure IE from bank etc? Is a valuation of the property required? Is there a Solicitor involved? Are the Revenue informed?

I’m sorry for all the questions. This is new to me and I’m just trying to get a handle on it.

Thanks again.

Yes it is the same as if you were buying a house normally. So all of them are involved.

Mortgage brokers/Bank - Need a new mortgage so shop around.

Solicitor and Revenue - Change of title deed, pay off of old mortgage etc.

Valuation - You'll need this to agree the price or to sell outright

Hmm the whole thing is a tricky situation. If the bank do a credit search on the the party who wants to hold onto the property, then they will be less likely to obtain the mortgage, due to having a personal loan and credit cards . . .

The broker has asked would a brother of this party be able to put his name on the property to make the case look stronger for taking on the new mortgage. The brother is not inclined to do this incase there are any implications.

Well if the brother owns a property and goes as guarantor on the mortgage it could strengthen the case. However the implications for him if the main mortgage holder is unable to meet the repayments are he could lose his home. Be wary of broker suggesting that going guarantor is trivial, it is not really.

Hmm the whole thing is a tricky situation. If the bank do a credit search on the the party who wants to hold onto the property, then they will be less likely to obtain the mortgage, due to having a personal loan and credit cards . . .

Click to expand...

If that is the case it might not be such a good idea to take on the mortgage!

mf1 said:

In the past, Revenue have insisted that they will only calculate the duty based on equity only if the Lenders are joined in the Deed to release the borrower being bought out and to consent to the now total owner taking over the entire mortgage. I've successfully argued the case that if the now total owner is taking on a substantially bigger mortgage with a new lender ( i.e. who will not join in the Deed of Conveyance ) then the situation is the same.
I'll be interested to hear any of the other legal/tax practitioners views.
mf

Click to expand...

Gordon086 said:

I have spoken to the revenue again, in light of what you have said in your posts and they agreed with what you have said in relation to equity, only after I brought it up with them.

Other than that they say pay the SD on half the market value less €125k.

Click to expand...

I'm not sure what this means, other than the last sentence!

House owned 50/50 with partner.
Market value 500K
Mortgage outstanding 400K
To buy out the mortgage you need 400K + 50K to buy out the partner.
Luckily you have 100K savings, so you're borrowing 350K with a new bank/new mortgage.

Do you then pay Stamp Duty on the 250K worth of half the house? (250 - 125 = 125 X 7% =E8,750)

OR

Do you then pay Stamp Duty on the 100K which is owned free and clear(equity) i.e. the difference between the Market Value and mortgage outstanding, which is no Stamp Duty, being under the 125K threshold?

One more question MN, please. Will a deposit have to be paid too the bank on the said property I spoke about? The mortgage broker says no

Hi Ireland1, is the value of the property more than the value of the mortgage? If there was a deposit paid initially and the mortgage amount is less than the value of the property, then that's the equity and so a deposit woulndn't be necessary. I would think!

One more question MN, please. Will a deposit have to be paid too the bank on the said property I spoke about? The mortgage broker says no

Click to expand...

Well it depends what you mean by a deposit! The bank will only give you 92% of the current value of the house. In fact in the current market the bank may only give you 80% of the current value! Your broker should be able to tell you this. So if there is equity in the house you would have no problem. However if there is no equity then you would need to find a way to bridge the gap. Of course this all depends on the agreed price for sale and the valuation of the property.