Difficulty in releasing equity

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Art

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A friend of mine is looking to remortgage his house to release 70k equity on it in order to fund an extension. The mortgage outstanding is 250k - house is worth 400k. He is having difficulty in releasing the equity because his income is quite low. He looked at getting his parents as a guarantor but none of the financial institutions would allow this. He is now thinking of adding the parents to the title deeds and not charging them anything for this. With them on the title deeds he believes that he would easily get the equity released. Now I think there may be stamp duty implications here even though they are paying nothing. I am not absolutely sure about this however...Can anyone suggest what the best way to proceed is?
 
There would be stamp duty and Capital Acquisitions Tax implications based on the above, full tax advice should be taken before proceeding.
 
Best way to proceed for the parents or your friend?
 
He would be best off talking to his own solicitor. There are loads of issues in this scenario.
If he proceeds to transfer shares in the house to his parents, there are CAT and stamp duty issues all of which will very likely make the whole scenario uneconomical anyway. Plus there are all the issues of what happens if he cannot make the repayments - he has exposed his parents to debt. And if gets married and it becomes his family home.............

Maybe, if he cannot borrow the funds, then perhaps he simply cannot afford to do this extension?

mf
 
His income at the moment is 50k. He is aware of the CAT implications and will get his parents to write in their will that noone else can have any claim to it. It is the stamp duty costs that are particularly concerning. Is there any way around these?
 
"Is there any way around these?"

What people often forget is that tax avoidance/evasion in these circumstances very often leads to a situation where the parties cannot achieve an end result.

So - if in the circumstances outlined, the friend transfers a share of his property to his parents at no cost they will have CAT and Stamp Duty liabilities. Those liabilities will arise if it is done properly. If it is not done properly, the parties will be unable to raise the finance.

And what happens if the parents change their wills or tear up their wills? Unlikely I know but still what if?

mf
 
I really dislike the term 'release equity'. What is really means is the person wants to borrow more. Its the same as taking out a top up loan or an extra loan of 50k on the mortgage. This will bring borrowings to 320k so perhaps on a salary of 50k the lender has decided this is too much. Not getting at op but this term is used too much and is made to sound like the house is giving you a present of the equity built up whereas in reality it is just another loan.
 
What ages are his parents and are they working? The lender may require increased earnings rather than just assets.
 
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