I currently have a house worth around £460,000 and a remaining mortgage of £270,200 with NatWest due to expire on May 1st 2024.
This was purchased with me and my brother in law. 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 and increase our borrowing.
Now he would have to get out of the mortgage and he doesn’t expect any payment from the house since this has been confirmed.
Mortgage Help: Broker David Hollingworth answers your questions in our weekly column, “Navigating the Mortgage Maze.”
I need to know how to take it out as I’m on a better salary now as my base salary is £80,000 and commission is around £15-20,000 per annum.
I have my car finance ending in November 2023 with outstanding credit cards totaling around £4,000.
Would stamp duty be due if his share was transferred to me? There would be no exchange of money or payment to him. It would just be a matter of releasing him from the mortgage and deeds.
He has expressed that he enjoys doing this too. What’s the best way to approach this since it’s giving me sleepless nights? AR, By email.
Scroll down to find out how to ask David YOUR Mortgage question
David Hollingworth answers: High property prices pose major challenges for anyone looking to purchase a property, whether as a first-time buyer or a mover.
Affordability remains one of the biggest hurdles, despite some signs of property prices falling due to the current low market activity.
It’s long been the case that parents are a crucial part of the equation for any would-be first-time buyer. It is not limited to the bank of mom and dad and may also require the help of other family members.
> What’s next for mortgage rates and should you correct them?
Buying with your brother-in-law helped increase income levels so the lender could be confident that the mortgage would be affordable, probably at a time when your income was lower than it is today.
This effectively enabled you to take out a larger mortgage than you would otherwise have been able to secure on your own.
This made the purchase easier, but not only did you make the entire monthly payment, but you also increased the down payment.
Therefore, the arrangement worked well for you, and your brother-in-law’s help likely resulted in you being able to purchase a home more quickly.
However, this can clearly impact both of you.
Firstly, this was structured as both co-owner and co-borrower.
Some lenders now offer the option of transferring the mortgage into joint names to increase borrowing capacity, but without requiring the property to be in joint names.
Here it sounds like the property is owned equally by you.
Since your income situation has now improved, it’s understandable that you want to take full responsibility, which was probably the ultimate goal from the start.
Your brother-in-law may also want to get out of the property long-term because he is jointly and severally liable for the mortgage payments.
This could also affect what he can borrow in the future, as any other lender would view this borrowing as a liability.
This also means that if he bought another property or moved, it would be an additional property and therefore the 3 per cent surcharge on land stamp duty would apply.
> How to remortgage your house: A guide to finding the best deal
Affordability remains one of the biggest hurdles, although there are signs of property prices falling due to higher interest rates
Although there is often a need to buy out another owner, the only requirement is that you take over the mortgage in your own name, performing what is known as an equity transfer.
You must be able to demonstrate that you can meet the lender’s affordability criteria yourself, and the lender will not simply release your brother-in-law from the mortgage until they are satisfied that the mortgage is affordable.
Lenders consider income and expenses when assessing affordability, rather than applying a simple multiple. But even considering just your base salary would equate to an income of less than 3.5 times.
Assuming there is a track record of regular commission payments then this should only improve affordability and car finance payments will also end soon.
> Check how much you would pay with our best mortgage rates calculator
Transfer and Stamp Tax
There will also be some legal work involved and legal advice will be important to help you better understand the way forward and address your concerns.
You are right to ask yourself whether stamp duty costs could arise when transferring equity.
This would be calculated based on the amount of “eligible consideration”, which would include not only any cash payments but also the amount of the mortgage taken out.
In your case, there is no money to be paid back, but you are responsible for the other half of the mortgage.
That equates to just over £135,000, which is nowhere near the current nil rate band of £250,000 for stamp duty.
There should therefore be no stamp duty liability to worry about, assuming you do not own any other properties that would trigger the additional property surcharge.
Advice on the mortgage and legal side is designed to help you move forward and hopefully do so with confidence.
Get answers to your mortgage questions
David Hollingworth is This is Money’s mortgage expert and broker at L&C Mortgages – one of the UK’s leading specialists.
He’s ready to answer your home loan questions, whether you’re buying your first home, trying to remortgage amid interest rate chaos or planning further into the future.
If you would like to ask him a question about mortgages, email email@example.com with the subject line: Mortgage assistance
Please provide as much detail as possible in your question so that he can respond in detail.
David will do his best to respond to your message in an upcoming column, but he will not be able to respond to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Navigate the mortgage maze
Some links in this article may be affiliate links. If you click, we may receive a small commission. This helps us finance This Is Money and keep it free to use. We don’t write articles to promote products. We will not allow a commercial relationship to compromise our editorial independence.