Buying half the house

[IfIGoThereWillBeTrouble]

i posted this on the divorce/separation board, but it was suggested that I post here instead.

DB and SIL are divorcing. They jointly own a house, with a mortgage. DB would like to stay in the house, but won’t be able to get a mortgage big enough to buy out SIL.

DM has suggested that she buy SIL’s share of the house, then DM and DB would own the house jointly. Is it possible to buy “half a house” like that?

The bulk of the settlement is SIL’s share of the equity in the house, so DB would have to pay SIL some money on top of the money DM would pay for the house. If DB paid “his” part of the settlement directly to SIL and DM paid “her” part directly to SIL, is that allowable? Not sure if all of the money has to be transferred directly from DB to SIL, or whether it’s a case of as long as SIL receives the full settlement, it doesn’t matter how it is paid/who pays it.

@IfIGoThereWillBeTrouble It should be possible, but care needs to be taken that the financial settlement is in place before any money is handed over.

Any money “handed over” should be via solicitors on transfer of SILs share of the property to DB/DM. DM & DB need to think how they own the property I.e. joint tenants or tenants in common. I would also recommend a Deed of Trust showing % ownership and covering what happens in a range of scenarios e.g. who is responsible for paying for repairs, what happens if DM needs the money for care home fees etc. Your DB and DM also need to draw up new wills that cover a range of options including death or serious injury or ill health etc. of either one of them. Any assumption that DB will outlive DM could be disastrous.

Another option to investigate is that DM provides a private mortgage or loan. DB would own the property and the “private mortgage/loan” would be secured against the property and recorded on the Land Register as a 2nd charge. This does have implications for the existing mortgage provider as it would be a second charge and would therefore need their approval.

I cannot emphasis enough that your DB and DM both need their own independent legal advice before embarking on this course of action. Failure to get this right, particularly the timing and paperwork, could have unforeseen consequences.

If your brother buys SIL out there is no stamp duty incurred. However if your MIL buys her out she will be due to pay stamp duty, presumably at second home owner rate.

If she gives the money to DBro to buy his wife out, and then your DBro gives her half the house I think stamp duty is still payable as the house is mortgaged.

Legal advice and done through a solicitor to address this issue.

@Foreversearch Thank you. I bet neither of them had thought about possible care fees, I certainly hadn’t.

Also your Mum’s share of the house would be subject to Capital Gains Tax should she wish to sell her half at any stage.

You can give money to a child and it not be seen as avoiding card fees. Depends how much money you have! However definitely see a solicitor.

The Mum would presumably have her own house / main residence to sell should she need to pay for care fees.

Deprivation of assets is very hard to prove if it was before any care needs or condition likely to need care become apparent. Giving away money to your child is fine in IHT terms if the parent survives 7 years afterwards. Otherwise IHT might be liable on a sliding scale (over the 7 years) if the estate is more than £500k (if it includes the amount for passing in your house).

Careful thought needed wrt her Will if she intends to leave her estate equally to you, your brother and any other siblings.