Selling share of house to sibling - help!

D

DinaP

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Hi,
I am selling my share in a house to my sister - initially we both took out

  1. Mortgage (92%)
  2. Bridging Loan (for the other 8% of house value plus some to furnish/decorate)
The agreement was to pay everything 50/50 which we did.
So in the sale I will receive 50% of the rise in the value of the house and a figure for furnishings (less depreciation).
She will then be 100% owner of the house.
My question in whether or not I need to continue repaying the bridging loan we took out and if so why?
My thought was no as if so then i should still own 4% of the house - which I won't. She disagrees!
Please help!!!

thanks!!!
 
Re: Selling share of house to sibling - help!!!!

if its her house, then it's her bridging loan too, seeing as the bridging loan was used to finance the house.
 
Re: Selling share of house to sibling - help!!!!

I think I have to side with your sister I'm afraid. If the mortgage and bridging loan are split 50/50 and you expect to get 50% of the rise in value (and something for furnishings) then I think that half the balance of the bridging loan is also your responsibility to pay off. You could clear 50% of the remaining balance with your profit from the house. Your sister still is responsible for the remaining amount outstanding of the bridging loan. Why do you believe that you aren't responsible for half of the bridging loan? Maybe I missed some detail in the initial post.
 
Re: Selling share of house to sibling - help!!!!

Let's assume you borrowed €250k(€230k mortgage €20k bridging) between you and the house is now worth €300k.By offering you 50% of the rise in the value your sibling is effectively buying you out for €150k.So €125k of your buyout price goes to paying your half of the loans and €25k goes into your pocket.As should be clear your sibling must assume responsibility for both loans and pay you as well.Ideally your sibling should get a new mortgage for €275k pay you €25k and clear the €250k in original loans .Obviously all the figures in this example assume that little has been paid off the capital
 
Re: Selling share of house to sibling - help!!!!

DinaP said:
Hi,
I am selling my share in a house to my sister - initially we both took out

  1. Mortgage (92%)
  2. Bridging Loan (for the other 8% of house value plus some to furnish/decorate)
The agreement was to pay everything 50/50 which we did.
So in the sale I will receive 50% of the rise in the value of the house and a figure for furnishings (less depreciation).
She will then be 100% owner of the house.
My question in whether or not I need to continue repaying the bridging loan we took out and if so why?
My thought was no as if so then i should still own 4% of the house - which I won't. She disagrees!
Please help!!!

thanks!!!
Click to expand...

You definitely don't have to pay the 4%.

Basically - where i suspect your sister is making her mistake is that she asociates the word 'mortgage' with the house and 'personal loan' outside any house dealings.
The bottom line is that it is all borrowed money to purchase the property.
The terms 'mortgage' or 'personal loan' are only relevant to what % interest you pay the bank.

Ask your sister this question to try to illustrate it clearer:

Lets assume the house cost 100k.

What would happen if.for arguments, sake that to buy the house you got a mortgage 50% and a personal loan for the other 50%.

Lets ignore house price increases/decreases as it is irrelevant to the main disagreement.
Therefore - for simplicity,lets assume the house price is the same.

SO - you bloth now have to service 2 loans.

A mortgage of 25k each along with a personal loan of 25k each.

If you were to sell ylour share of the house to her, it means ytou should then transfer both the 25k mortgage and the 25k personal loan to her.

If i am correct in what you are saying, your sister would be suggesting in that instance that she will agree to take the 25k mortgage off your hands but insists you keep servicing the 25k personal loan.

So - in that instance - if your sister decided to sell the house tomorrow for 100k she would actually make a 25k profit - and you would be 25k in debt !

Which is obviously wrong if we are assumng the house price did not change.

Or using other figures to illustrate it.
Assume you got a mortgage of 1% - and a personal loan of the remaining 99%

What would your sister say you owe then?

In fact I don't think i explained my point well - but in a nutshell, you definitely should not be servicing any loans related to the hlouse when you have no ownership over the hlouse.

Only the owner of the property should be servicing any loans/mortgages related to the property.

And when your suister agrees to take over control of the house then unfortunately for her she must agree to take over all loans outstanding on the property also.
 
Re: Selling share of house to sibling - help!!!!

Hi,
Thanks for the replies.
I just want to clear something up tho... I said "bridging loan" (I don't know what that is really!!) It is "a loan" - I don't think this should make a difference to the answers tho as it was used as I mentioned for 8% to buy the house and the rest for furnishings.
But if you think it does make a difference then please let me know!
Thanks again!!
 
Re: Selling share of house to sibling - help!!!!

Don't forget that you are due half any capital paid off the mortgage and half any capital paid off the proportion of the other loan that went to pay the 8% balance of the purchase price.However on the balance of the extra loan that bought furnishings you both will have to come up with a fair price for them now .If that price is less than the outstanding balance on that portion of the loan,you will owe half the shortfall to your sibling
 
Re: Selling share of house to sibling - help!!!!

Quite right vandriver.

Also - you may wanna look into stamp duty.
STamp duty is payable if the names on the title change - ad that includes if you are oly deleting one of the names from the title even if it is a sibling.

That happened me in the past anyway.

You would certainly have to pay stamp duty if this is an investment property.

If it's a PPR though then i'm not so sure.
It may not be payable.

Worth looking onto though.
 
Re: Selling share of house to sibling - help!!!!

DinaP said:
Hi,
Thanks for the replies.
I just want to clear something up tho... I said "bridging loan" (I don't know what that is really!!) It is "a loan" - I don't think this should make a difference to the answers tho as it was used as I mentioned for 8% to buy the house and the rest for furnishings.
But if you think it does make a difference then please let me know!
Thanks again!!
Click to expand...

It makes no difference.

A bridging loan is just a seperate loan that is not included on teh mortgage.
Basically it's a personal loan.
 
Have to aplogise for my bad advice yesterday. Thinking about it again and reading through the other posts corrected my tunnel vision. Sorry!
 
Its quite simple, as it stands you are liable for half of both the Mortgage and Loan.

You are entitled to half the equity in the property

Market Value minus the total of both loans = Equity

Your sis will most likely need to re-mtg into her own name and release enough equity to pay you off
 
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