I’m buying a house with my boyfriend – is 10% of equity fair? | Tax
Q My boyfriend is buying a house and I plan to contribute cash towards his purchase. The mortgage will be in his name only because I already own another property (which I intend to keep and rent). The property is worth £ 487,000 so I plan to contribute £ 48,700 plus £ 1,435 stamp duty to own a 10% share of the property. I will then pay half the mortgage with my partner each month. I asked if it was fair, because if we were to go our separate ways, I would only walk away with 10%. He will pay £ 50,000, plus the rest of the stamp duty and costs. He has two children and has gone through a divorce so is trying to protect himself as he mentioned that I already own a house. It bothers me that this arrangement is not the fairest way to deal with it. Any advice would be greatly appreciated.
A I am with you on the arrangement which is not the most fair, because it is not. Paying 10% of the purchase price and then paying half of the mortgage each month should entitle you to a share of more than 10% (because part of the monthly mortgage repayment goes to pay off the loan, thus increasing your income. equity). However, I can also understand that going through a divorce proceeding maybe made your boyfriend a little shy about condominiums, but if so, maybe he should avoid condominium altogether. . And maybe you should too if you are doubtful about the fairness of it all, especially because such a lack of trust cannot be good for your relationship. It can also make sense from a financial standpoint. Because you already own a property that you will not sell, the Land Stamp Duty (SDLT) due on the entire purchase price of the new property would be at the highest rate (i.e. standard rate plus 3%) so your 10% share of the total SDLT bill would be £ 2,896 instead of £ 1,435. The higher SDLT rate will also apply if your boyfriend’s old family home has not been sold and there is still interest. However, if a family home arrangement with his ex-spouse has been recorded in a court-approved consent order, he will be exempt from paying the higher rate of SDLT.
What really worries me is that if you are not named on the mortgage, you also will not be named as a co-owner of the property in the land register. This is a rare, if not nonexistent, lender who is willing to issue a one-name mortgage when there is more than one person named in the land register. This is because if there is a mortgage holder but two official owners, if the mortgagor defaults, a lender cannot take possession of the property while the other owner is still living there and the lenders do not. don’t like the idea of not being able to get their money back. Before releasing money, you need to establish exactly what your cash contribution is buying. Additionally, I suggest that you get legal advice on the type of written agreement you should have drafted to say how you will get your money back if you and your boyfriend go their separate ways and / or the property is sold.
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