Buying into my girlfriends house.

  • Thread starter MaverickUK82
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MaverickUK82

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The short of it:
My girlfriend owns a house, we have been together 4 years and we have a daughter together. I would like to buy into half.
The complications:
My girlfriend bought her house with her husband. They split up, she took out a second mortgage to pay him off. They divorced. The house is now in her name only, is worth £130,000 with a combined mortgage of £90,000 (that's a settlement figure, including redemption fees)
How we want to do it:
We are going take out a joint re-mortgage to pay off the £90,000. Fixed for three years. We will then see a solicitor, who will add my name to the deeds of the property.
Conditions:
As the house in currently worth £40,000 more than the outstanding mortgage, we will have something drawn up by the solicitor along the lines of: If we ever sell the house, my girlfriend would take her £40,000 out of the sale price, the remainder of the profit/loss, would be halved. This way, any profit she has gained (the £40,000) while the house was hers alone, would be kept by her.
The thing...
I am totally happy with all this. But I've been reading through some posts on here and there is mention of taxes, CGT, CAS and I'm confused. Surely we won't have to pay any taxes etc to do this, would we? What are the complications of doing this? there is no profit to be made by any of us. The way I see it, it's just a re-mortgage in both our names.
Is what I've suggested actually possible?

Please help!

Nath
 
MaverickUK82 said:
The short of it:
My girlfriend owns a house, we have been together 4 years and we have a daughter together. I would like to buy into half.
The complications:
My girlfriend bought her house with her husband. They split up, she took out a second mortgage to pay him off. They divorced. The house is now in her name only, is worth £130,000 with a combined mortgage of £90,000 (that's a settlement figure, including redemption fees)




As this is over the 125K Stamp Duty threshold you would likely be deemed liable for a full stamp on the current value of the house - particularly if you are putting in place a separate agreement indicating the 40K your girlfriend would own. It might(!?) be in your interest for the house to be 'only' worth 124999 when you complete the transaction - and values are dropping so that may be happening anyhow.



How we want to do it:
We are going take out a joint re-mortgage to pay off the £90,000. Fixed for three years. We will then see a solicitor, who will add my name to the deeds of the property.




Cant see any issue here - the mortgage company would obviously have a big say.


Conditions:
As the house in currently worth £40,000 more than the outstanding mortgage, we will have something drawn up by the solicitor along the lines of: If we ever sell the house, my girlfriend would take her £40,000 out of the sale price, the remainder of the profit/loss, would be halved. This way, any profit she has gained (the £40,000) while the house was hers alone, would be kept by her.



See my point above


The thing...
I am totally happy with all this. But I've been reading through some posts on here and there is mention of taxes, CGT, CAS and I'm confused. Surely we won't have to pay any taxes etc to do this, would we? What are the complications of doing this? there is no profit to be made by any of us. The way I see it, it's just a re-mortgage in both our names.
Is what I've suggested actually possible?




While I am not an expert I believe you would be personally liable for a Capital Acquisitions tax on the entire value of the property - I think 20%. You will have an exemption of around 26K or so based on the fact that you are not married so you could end up with a bill approaching 20K.


If you got married before doing all of this you would have no tax liability and the stamp duty liability would be based on the 'value' of the house.



Please help!

Nath
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This is an Irish site - are you located in UK?

If we ever sell the house, my girlfriend would take her £40,000 out of the sale price, the remainder of the profit/loss, would be halved.
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Regardless of tax etc., this doesn't seem fair to your GF. Her £40,000 should participate fully in any growth in the value of the house (i.e. if the house rises 50% over 10 years and you sell it, she should get £60,000 before the balance is divided evenly.).
 
yes. I am in the UK. didn't realise this was an Irish site.
 
MugsGame said:
Regardless of tax etc., this doesn't seem fair to your GF. Her £40,000 should participate fully in any growth in the value of the house (i.e. if the house rises 50% over 10 years and you sell it, she should get £60,000 before the balance is divided evenly.).
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We discussed this. However, the £40,000 has locked in the house now will always stay locked in it won't it? We discussed it going in as a percentage (say for arguments sake, it worked out to 60/40), but then, to keep things even, she's have to pay 60% of the mortgate, 60% of mainteneance etc.
 
However, the £40,000 has locked in the house now will always stay locked in it won't it? We discussed it going in as a percentage (say for arguments sake, it worked out to 60/40), but then, to keep things even, she's have to pay 60% of the mortgate, 60% of mainteneance etc.
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No. She starts off with £40k equity and £45k mortgage, you only have £45k mortgage. If you split the repayments evenly she should be entitled to (40+45)/(40+45+45) of the proceeds. I suppose maintenance does complicate things slightly, but even so I think your girlfriend is being far too generous. Has your solicitor recommended you both get independent legal advice?
 
her 40K EQ should be a % of the house value, or just give her 20K and then half everything.
 
colm5 said:
her 40K EQ should be a % of the house value, or just give her 20K and then half everything.
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OP - ignore any advice or commentary posted in this thread as the laws around this kind of transaction are undoubtedly handled differently by HM Customs & Revenue.

You will get advice from a UK site - sorry. :(
 
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