Transfer of ownership of property during break up of relationship

**PlanB** · 24th January 2014, 22:24:PM

Re: Transfer of ownership of property during break up of relationship

Originally posted by Amethyst View Post

Posted on behalf of new user.

I have a friend who is a joint mortgagee with her fiance and she put down a large deposit to buy the house (he put down nothing).

The house is rented out now and they are renting a property elsewhere. The relationship is breaking down now and neither party have made a will; he has estranged children from a previous relationship (marriage) but there are no children involved in their relationship.

They have spoken about him transferring the ownership of the house over to my friend, but she would like clarification on how complex this process might be.

Can you encourage your friend to post on here. It's difficult to advise otherwise

**CleverClogs** · 25th January 2014, 00:27:AM

Re: Transfer of ownership of property during break up of relationship

Originally posted by Amethyst View Post

Obviously, in the worst case scenario, if anything happened to either of them before this is resolved, she might end up losing some/all of her investment in the house?

Yes, indeed.

Any advice you can offer about how best to proceed in a cost-effective manner would be gratefully received.

Murder the children first. :grin:

More seriously, who contributed to the mortgage repayments?

**enquirer** · 25th January 2014, 08:09:AM

Re: Transfer of ownership of property during break up of relationship

Originally posted by Amethyst

She would presumably have to approach the mortgage company and go through, in effect, the motions of applying for a new mortgage?

Almost certainly.

Also, how costly is this process?

That depends on the lender.

Obviously, in the worst case scenario, if anything happened to either of them before this is resolved, she might end up losing some/all of her investment in the house?

Are they Joint tenants or Tenants in common?

**PlanB** · 26th January 2014, 14:27:PM

Re: Transfer of ownership of property during break up of relationship

Originally posted by Amethyst View Post

I have a friend who is a joint mortgagee with her fiance and she put down a large deposit to buy the house (he put down nothing).

The house is rented out now and they are renting a property elsewhere. The relationship is breaking down now and neither party have made a will; he has estranged children from a previous relationship (marriage) but there are no children involved in their relationship.

They have spoken about him transferring the ownership of the house over to my friend, but she would like clarification on how complex this process might be.

Is it a transfer of equity and is this the recommended route?

She would presumably have to approach the mortgage company and go through, in effect, the motions of applying for a new mortgage?

Obviously, in the worst case scenario, if anything happened to either of them before this is resolved, she might end up losing some/all of her investment in the house?

This is strictly business even though it feels personal

Starting at the end and with the unthinkable. If your friend's fiancé should inconveniently die before this is all sorted your friend would still have a claim on the money she has invested regardless of what it says in his Will. A Will can always be challenged although it's not ideal and it is expensive. The lawyers are the only winners. Think "Bleak House" by Charles Dickens. What evidence does she have that she paid the deposit for the property?

If the property is being rented out and therefore neither of their main homes (principal residence for HMRC purposes) then there may be a Capital Gains Tax bill to pay when it's sold in years to come. That needs to be addressed now so get advice from an accountant. As it stands the house is in joint names so both would liable even though it hasn't been sold. When that day comes there will be a retrospective calculation done including her fiancé in those calculations so she may need to keep tabs on his whereabouts for years to come unless she can do a deal now. Having said that it seems they are both renting elsewhere (not owning another property) which can mitigate this future bill. However as I understand it you have to tell HMRC who has nominated it as their PPR within two years of acquiring the property if either of them buy a property in future. It's really complicated and she needs an accountant's overview.

There will also be a messy tax calculation for the rental income. Is the mortgage an interest only loan or a repayment mortgage? If it's interest only then the interest can be offset against tax (both parties') so in effect neither has paid towards the current value of the property. If it's a repayment mortgage then some of the monthly payments will be put towards reducing the capital borrowed. In that case then the fiancé has been contributing towards the increasing value of the property. If you follow my logic.

It's not clear how long they have owned the property and whether it has increased in value since then. Her fiancé will be entitled to his share of the increase after deducting her deposit. But as Cloggy says who has made the mortgage payments? Was this a 50/50 contribution? If her fiancé paid more or vice versa this will need to be factored into the maths.

If you transfer a property from one person to another their may be Stamp Duty to pay if the property is valued at over £125k which is the current limit for exemption. I think it will only be charged on her half (i.e. if the property is valued at £250k or over).

The mortgage company may be willing to remover her fiancé's name from the mortgage but only if her income stacks up. She will be underwritten as an individual. Most menders will not require a whole new mortgage product (unless she wants that). His name will simply be erased from the account and various bits of paperwork will be signed to reflect this so he can be released from future legal obligations. Once the mortgage is in her sole name she will be free to remortgage with any lender to get a better offer if she wants to.

If her income doesn't satisfy the current lender's criteria she has a real problem. I fear she's stuck with him albeit they could draw up some formal agreement (like a divorce only not like a divorce) where it's all clearly spelt out and signed by both parties. This must be done through a lawyer. There's no such thing as "goodwill" when it comes to relationship breakdown.

**PlanB** · 26th January 2014, 14:40:PM

Re: Transfer of ownership of property during break up of relationship

Originally posted by Amethyst View Post

I have a friend who is a joint mortgagee with her fiance . . . . The house is rented out now and they are renting a property elsewhere.

^^^^ Does the lender know the house is rented out? If this was a Buy To Let mortgage from the start then that's fine. If it was residential mortgage then that's not fine. The lender has to give permission to rent out a property at which point they usually add a premium to the interest rate charged. This is typically an extra 1%. In some extreme (but not unknown) cases the lender will seek to repossess a property on the basis of a breach of contract.

I don't want to spread doom and gloom but your friend needs to wise-up about the downside to all of this. Too many couples buy property together while in a romantic fog without realizing the deal could come back to bite them on the bum when the relationship breaks down

Conversely some couples stay together as a direct result of being faced with the financial complications

Transfer of ownership of property during break up of relationship

Transfer of ownership of property during break up of relationship

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