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Original poster

Complex situation. What would you advise?

53 replies

latesummerearlyautumn · 08/08/2021 14:26

I own a house, outright, no mortgage. It is worth around £140,000

DP owns a house, with a mortgage, which is worth around £450,000.

We have seen a property we both like and are keen to buy. Rather than going through the complexities of selling two properties, DP has suggested we remortgage mine with us both on the mortgage, sell his (houses here tend to go fairly quickly) and then both get a joint mortgage on the new property.

Are there any drawbacks I haven’t thought of?

OP posts:
JackieCollinshasnoauthority · 08/08/2021 14:29

What drawbacks have you thought of so far?

Original poster
latesummerearlyautumn · 08/08/2021 14:33

Potential drawbacks are:

  • it means that we have two houses, and that obviously means we are landlords (my house is currently let out) but aren’t making a profit.
  • less of a deposit for the house we both like so higher mortgage payments

That’s it really.

I’m also worried I might not be accepted for a mortgage, especially on two properties.

OP posts:
Gizlotsmum · 08/08/2021 14:34

What happens to the money from his house? From what you said he will gain a right to your house and you both have a right to the new house? So he potentially saves the money from his house sale? Why can’t you remortgage his house and put your name on his mortgage?

PurBal · 08/08/2021 14:35

3% stamp duty

drowsy · 08/08/2021 14:35

Would you be able to get another mortgage? And if you sell one of the properties later you might have to pay a lot of capital gains tax.

Original poster
latesummerearlyautumn · 08/08/2021 14:36

The money from his house would go into the new property.

He will gain a right to my house and we will both gain a right to the new house, that is correct.

He potentially saves the money from his house sale - no I think you’ve misunderstood. This would go into the new property.

Why can’t you remortgage his house and put your name on the mortgage - because we want to move.

OP posts:
NavaniKholinRocks · 08/08/2021 14:37

Capital Gains Tax for future sale of your property?

SW1amp · 08/08/2021 14:37

If yours is already let out, what are the ‘complexities’ of selling 2 houses?

Do you intend to get married at any point in the future? Will you be liable for CGT on your house?

Original poster
latesummerearlyautumn · 08/08/2021 14:41

@SW1amp - it would be very complex because I’d have to serve notice on the tenant and go through all of that and then sell it.

Bearing in mind we have seen the house now, speed is a factor too. Yes, we will be getting married. I’m not sure re CGT, to be honest.

OP posts:
Itscoldouthere · 08/08/2021 14:42

You will have to pay an extra 3% stamp duty as your new purchase will be classed as a second home if you already own another house.
You could probably change your other house to a BTL mortgage, you would become landlords, not something to take on lightly or something everyone wants to do.
You might encounter capital gains tax.

Original poster
latesummerearlyautumn · 08/08/2021 14:43

Yes, we’d be looking at a BTL mortgage. I’m already a landlord but obviously it means that will continue.

OP posts:
ChicChaos · 08/08/2021 14:52

BTL mortgages may require a certain percentage to be covered by the rent, and won't give a one hundred percent mortage. I don't see the benefits at all of converting your unmortgaged property to a BTL.

Original poster
latesummerearlyautumn · 08/08/2021 14:53

We wouldn’t need a 100% mortgage, it’s owned outright at present. We’d probably release about £70.

OP posts:
BeaBeaBuzz · 08/08/2021 15:34

Why wouldn’t you just borrow everything you need to on new how, using his equity as deposit and leave your house as is. BTL rates are generally higher so I don’t see benefit in shifting 70k borrowing from main house to BTL

pinkmoon18 · 08/08/2021 15:36

I would keep your house as it is.

SW1amp · 08/08/2021 15:42

@BeaBeaBuzz

Why wouldn’t you just borrow everything you need to on new how, using his equity as deposit and leave your house as is. BTL rates are generally higher so I don’t see benefit in shifting 70k borrowing from main house to BTL
That depends on whether they can raise enough from the sale of his house, and also what the LTV would be with and without the remortgage, surely
MostlyHappyMummy · 08/08/2021 15:52

But once your house is in joint names - he can just walk away. What then?

Original poster
latesummerearlyautumn · 08/08/2021 16:04

@BeaBeaBuzz

Why wouldn’t you just borrow everything you need to on new how, using his equity as deposit and leave your house as is. BTL rates are generally higher so I don’t see benefit in shifting 70k borrowing from main house to BTL
That’s another possibility but means I would own one and a half houses while he owns one half.

Well yes he could @MostlyHappyMummy but I’m not really sure I follow. I’m not being difficult but while I obviously need to protect myself I am sharing my life with this person and I do have to have some trust.

OP posts:
MostlyHappyMummy · 08/08/2021 16:37

Just wasn't sure why you would remortgage your property together instead of alone? What's the benefit of him becoming co-owner? While his property remains his until he sells it and then his equity is his until he puts it into a new house purchase with you.

I probably don't understand the situation clearly.

Original poster
latesummerearlyautumn · 08/08/2021 16:46

Essentially it means we are both equal. We both own two properties: no sense of his house and my house as we currently have.

OP posts:
Dillydollydingdong · 08/08/2021 16:51

Sell yours, bank the proceeds. You move into his house. Then sell his and buy new joint property in the usual way, with the proceeds from both. Where's the problem?

Original poster
latesummerearlyautumn · 08/08/2021 16:53

I’ve explained.

OP posts:
MoreHairyThanScary · 08/08/2021 16:58

Could you not just get a single mortgage on the new house ( only 1 lot of fees) and add him to the deeds of your old house if you want to be fair.

As others have pointed out you will have to pay CGT should you sell your house in the future and stamp duty may be higher?

Original poster
latesummerearlyautumn · 08/08/2021 16:59

Possibly. We are meeting with a mortgage advisor tomorrow.

OP posts:
jackstini · 08/08/2021 17:15

What equity does he have in his house? Similar to the £140k in yours?

If you can, sell his house and buy new one in just his name. This will save you the 3% stamp duty for second homes

Once gone through, apply to have deeds for both houses in joint names, then have one BTL mortgage and one normal

Then when you do sell the BTL you can use both your capital gains tax allowances

What is the rent coming in and what do you do re tax returns for your BTL currently? Is it on a BTL mortgage already or standard but with tenant permission?