I currently have a house valued at around £460,000 and a remaining mortgage of £270,200 with NatWest, which will end on 1 May 2024.
Me and my brother-in-law bought this. I had put down the entire deposit on the house and made all the payments, but he was presented with a joint application to try to increase what we can borrow.
Now he would need to get out of the mortgage and he does not expect any payment on the house as has been confirmed.
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I need to know how I can remove it as I now have a better salary – my base is £80,000 and commission is between £15-20,000 a year.
I have my car finance ending in November 2023 with outstanding credit cards of around £4,000 in total.
Would stamp duty be payable if your share was transferred to me? There would be no money exchanged nor would anything be paid. It would simply be a case of removing it from the mortgage and the deeds.
He has expressed that he is happy to do this as well. What is the best way to address this as it gives me sleepless nights? AR, via email.
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David Hollingworth replies: High house prices have posed considerable challenges to anyone looking to purchase a property, whether as a first-time buyer or relocator.
Affordability remains one of the biggest obstacles despite some signs of reductions in house prices due to current low levels of market activity.
It has long been the case that parents have been a critical part of the equation for any aspiring first-time buyer. It is not limited to the Bank of Mom and Dad and may require help from other family members.
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Buying together with his brother-in-law helped increase his income level, so the lender could be sure that the mortgage would be affordable, presumably at a time when his income was lower than it is now.
That effectively saw him allow himself to take out a larger mortgage than he would otherwise have been able to obtain on his own.
That made the purchase easier but not only have you made the entire monthly payment but you have also paid the deposit.
So, the deal has worked well for you and your brother-in-law’s help has probably managed to speed up your own home buying process.
However, that clearly can have implications for both.
First, it has been structured as a co-owner and co-borrower.
Some lenders now offer the option of putting the mortgage in joint names to boost borrowing, but without requiring the property to be in joint names.
Here, it appears that the property belongs equally between you.
As your income situation has improved, it’s understandable that you want to take full ownership, which was probably the end goal all along.
Your brother-in-law may also prefer to lose the property in the long term, since he is jointly responsible for the mortgage payments.
This could also have a knock-on effect on what you can borrow in the future, as any other lender would take that loan into account as a commitment.
It also means that if you bought another property or moved house, it would be an additional property and would therefore attract the 3 per cent Stamp Duty Land Tax surcharge.
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Affordability remains one of the biggest obstacles despite some signs of reductions in house prices due to higher interest rates.
Although it is often necessary to buy out another owner, the only requirement here is that you assume the mortgage in your own name and complete what is usually known as an equity transfer.
You will need to be able to demonstrate that you can meet the lender’s affordability criteria in your own right and the lender will not simply release your brother-in-law from the mortgage until they are satisfied that the mortgage is affordable.
Lenders will take income and expenses into account when assessing affordability rather than applying a simple multiple, but even taking into account just your base salary would amount to less than 3.5 times income.
Assuming there is a history of regular commission payments, that should only improve affordability and car finance payments will soon come to an end too.
> Check how much you would pay with our best mortgage rate calculator
Transfer and stamp duty
There will also be some legal work involved and legal advice will be important to help you better understand the way forward and to help allay any concerns you may have.
You are right to wonder if there could be stamp duty costs as a result of an equity transfer.
This would be calculated based on the amount of the “chargeable consideration”, which would include not only any cash payment but also the amount of the mortgage taken out.
In your case there is no money to pay but you will assume the other half of the mortgage.
That will equate to just over £135,000, which is nowhere near exceeding the current £250,000 nil rate band for stamp duty.
Therefore, there should be no stamp duty liability to worry about assuming you don’t own any other property, which would trigger the additional property surcharge.
Mortgage and legal advice should help you move forward and hopefully do so with confidence.
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David Hollingworth is This is Money’s mortgage expert and broker at L&C Mortgages, one of Britain’s leading specialists.
He’s ready to answer your home loan questions, whether you’re buying your first home, trying to remortgage amid rates chaos, or looking to plan ahead.
If you would like to ask him a question about mortgages, please email: firstname.lastname@example.org with the subject: mortgage help
Please include as much detail as possible in your question so you can answer in depth.
David will do his best to respond to your message in a future column, but will not be able to respond to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.
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