How should I separate 2 HMOs into individual names?

by Readers Question

10:38 AM, 16th June 2020
About 3 months ago

How should I separate 2 HMOs into individual names?

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How should I separate 2 HMOs into individual names?

Please could someone offer advice on the best way to remove someone from ownership on a property. I own 2 x buy to let’s with a family member. They are in our personal names.

They are small HMOs with 4 tenants sharing. They are of equal value/ equity / mortgage give or take. The fellow owner and I are on very good terms, but after holding them for 5 years our future financial plans are different so we want to have full ownership of 1 each. They are mortgaged, with one product ending 30/6/20 an another ending in December this year.

I’m just not sure what is the best / most tax efficient way to do it.

The other owner has the funds to pay off both property mortgages which they have suggested doing then I get a buy to let mortgage to pay back my share. However, it means I’d need to find a deposit for my new BTL mortgage so that doesn’t seem to work either.

Any advice / experience would be most helpful. In particular if there are better ways to avoid stamp duty etc.
Many thanks, Amanda


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Comments

Penny DJ

12:04 PM, 16th June 2020
About 3 months ago

Do the properties not have any equity- have they gone down in value since you took out the mortgages? In the normal course of events you would have had to remortgage both again this year With probably 75% LTV. If you could have remortgaged two, why can’t you arrange a mortgage on one?
If the co-owner pays back a 75% mortgage, and the property goes into your name with 25% equity, then surely you can raise a 75% mortgage as you hold equity.

acctsol

13:14 PM, 16th June 2020
About 3 months ago

Would you care to expand on your query. Who is/are the legal owners on the title deed. When you say family member, is this a spouse?

Any transfer of a property asset would be treated as a disposal at current market value unless made between spouses. This could very much have CGT/Stamp Duty implications depending on personal circumstances and values.

It would be wise to take professional advice. The accountant who prepares your yearly personal tax returns would be your first port of call IMO as they will know all your individual circumstances.

Failing that feel free to get in touch with our offices at acctsolution.co.uk and we would be happy to provide a no obligation consultation

Best

David

Amanda GdM

22:42 PM, 16th June 2020
About 3 months ago

Reply to the comment left by Penny DJ at 16/06/2020 - 12:04
Many thanks for these comments/ questions.

They are at 60% LTV at least.

The other legal owner is my fathers wife.

Puzzler

8:29 AM, 20th June 2020
About 3 months ago

You would need a conveyancer/solicitor to arrange transfer and each remortgage the properties into sole names, just as if you were buying a new property. You would not need a deposit as the property has equity in it. There would be tax implications. If you are in agreement go together to a broker and you will need separate solicitors.

Puzzler

8:34 AM, 20th June 2020
About 3 months ago

P.S. In view of the different dates of product end, wait until you can do both at the same time (or stump up the ERCs). It's very very important that the transfer of both is done at the same time.

Amanda GdM

19:46 PM, 20th June 2020
About 3 months ago

Reply to the comment left by Puzzler at 20/06/2020 - 08:29
Many thanks for your replies. That’s really helpful. I think she will pay one off and I will try to get a btl remortgage on my own and we will try and synchronise it so our names are removed at the same time.


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