Being named on wife's Buy to let Mortgage
Discussion
The mortgage on my wife's buy to let is up for renewal and she has asked if I want to be named on the mortgage.
We became accidental landlords due to 2008 when the flat my wife to be had bought before we met went deep into negative equity. During this time I have paid the mortgage myself during times when the tenant didn't want to pay the rent and we make a small loss on the flat every month.
Personally I want shot of the thing as I think it's a liability but she reckons we might as well hang on as the current tenant has been great and never missed a payment and has been with us for a number of years so the mortgage is getting paid off for us in her eyes.
So is it worth me getting added to the mortgage or am I better off not? As far as I understand it if we were to split I'd be entitled to 50% of the equity in it anyway?
We became accidental landlords due to 2008 when the flat my wife to be had bought before we met went deep into negative equity. During this time I have paid the mortgage myself during times when the tenant didn't want to pay the rent and we make a small loss on the flat every month.
Personally I want shot of the thing as I think it's a liability but she reckons we might as well hang on as the current tenant has been great and never missed a payment and has been with us for a number of years so the mortgage is getting paid off for us in her eyes.
So is it worth me getting added to the mortgage or am I better off not? As far as I understand it if we were to split I'd be entitled to 50% of the equity in it anyway?
4Q said:
Won't you be liable for stamp duty if you become co owner?
This, be careful as it's not as simple as just putting your name on the mortgage. Effectively your wife will be selling you part of the house, which means that (a) there might be stamp duty on your purchase, and (b) she might be realising a capital gain. I'm no expert and it's possible that things are different between husband and wife, but you should take qualified advice on this.Sounds odd to me. Two possible scenarios,
A. You become a joint owner and then jointly mortgage the property. There will be no Stamp Duty if you receive 50% of the property by gift. The may eventually be Capital Gains Tax complications. On the face of things rental income would split 50/50.
B. You simply become a Guarantor on her mortgage. The rental income will remain hers.
I don't understand is what advantages/disadvantages OP may perceive.
A. You become a joint owner and then jointly mortgage the property. There will be no Stamp Duty if you receive 50% of the property by gift. The may eventually be Capital Gains Tax complications. On the face of things rental income would split 50/50.
B. You simply become a Guarantor on her mortgage. The rental income will remain hers.
I don't understand is what advantages/disadvantages OP may perceive.
Panamax said:
A. You become a joint owner and then jointly mortgage the property. There will be no Stamp Duty if you receive 50% of the property by gift.
That's only true if there is no mortgage outstanding. If there's a mortgage, then it can't be a gift (or more correctly, they can only gift up to whatever proportion of the equity that is being split. The proportion that is mortgaged is treated as a cash transaction for tax purposes). From https://www.gov.uk/guidance/sdlt-transferring-owne...HMRC said:
The owner of a property decides to transfer half of their share to their spouse. The owner does not take a cash payment for this share, but there’s an outstanding mortgage on the property.
Their spouse takes on the responsibility of 50% of the outstanding mortgage. If the amount outstanding that their spouse takes on is more than the current threshold, Stamp Duty Land Tax is payable.
Their spouse takes on the responsibility of 50% of the outstanding mortgage. If the amount outstanding that their spouse takes on is more than the current threshold, Stamp Duty Land Tax is payable.
deckster said:
Panamax said:
A. You become a joint owner and then jointly mortgage the property. There will be no Stamp Duty if you receive 50% of the property by gift.
That's only true if there is no mortgage outstanding. If there's a mortgage, then it can't be a gift (or more correctly, they can only gift up to whatever proportion of the equity that is being split. The proportion that is mortgaged is treated as a cash transaction for tax purposes). From https://www.gov.uk/guidance/sdlt-transferring-owne...HMRC said:
The owner of a property decides to transfer half of their share to their spouse. The owner does not take a cash payment for this share, but there’s an outstanding mortgage on the property.
Their spouse takes on the responsibility of 50% of the outstanding mortgage. If the amount outstanding that their spouse takes on is more than the current threshold, Stamp Duty Land Tax is payable.
Their spouse takes on the responsibility of 50% of the outstanding mortgage. If the amount outstanding that their spouse takes on is more than the current threshold, Stamp Duty Land Tax is payable.
The property is in Scotland and the outstanding amount is less than £40k so from a quick look it looks like it's below the LBTT (SNP flavour of stamp duty) so looks like I won't attract any tax burden. Still worth getting a pro involved, I think she is getting a mortgage advisor so will see what they say.
I'm still not sure of any benefit to me unless we sell then I get half of the equity.
CLX said:
I'm named on the deeds and mortgage of my wife's buy to let and it's a pain, because I have to include it on my tax return every year. In fact, being a PAYE employee, I probably wouldn't even have to do a tax return, if it wasn't for this!
When it's eventually sold, you might find the CGT saving due to two allowances means you're paid a very fair hourly rate for the nause of doing a tax return.pete_esp said:
Thanks, I thought it might be more complicated than just sticking my name on the mortgage.
The property is in Scotland and the outstanding amount is less than £40k so from a quick look it looks like it's below the LBTT (SNP flavour of stamp duty) so looks like I won't attract any tax burden. Still worth getting a pro involved, I think she is getting a mortgage advisor so will see what they say.
I'm still not sure of any benefit to me unless we sell then I get half of the equity.
It’s not the value of the outstanding mortgage but the value of the property, you’ll also be liable for additional 2nd home stamp duty The property is in Scotland and the outstanding amount is less than £40k so from a quick look it looks like it's below the LBTT (SNP flavour of stamp duty) so looks like I won't attract any tax burden. Still worth getting a pro involved, I think she is getting a mortgage advisor so will see what they say.
I'm still not sure of any benefit to me unless we sell then I get half of the equity.
OutInTheShed said:
CLX said:
I'm named on the deeds and mortgage of my wife's buy to let and it's a pain, because I have to include it on my tax return every year. In fact, being a PAYE employee, I probably wouldn't even have to do a tax return, if it wasn't for this!
When it's eventually sold, you might find the CGT saving due to two allowances means you're paid a very fair hourly rate for the nause of doing a tax return.4Q said:
pete_esp said:
Thanks, I thought it might be more complicated than just sticking my name on the mortgage.
The property is in Scotland and the outstanding amount is less than £40k so from a quick look it looks like it's below the LBTT (SNP flavour of stamp duty) so looks like I won't attract any tax burden. Still worth getting a pro involved, I think she is getting a mortgage advisor so will see what they say.
I'm still not sure of any benefit to me unless we sell then I get half of the equity.
It’s not the value of the outstanding mortgage but the value of the property, you’ll also be liable for additional 2nd home stamp duty The property is in Scotland and the outstanding amount is less than £40k so from a quick look it looks like it's below the LBTT (SNP flavour of stamp duty) so looks like I won't attract any tax burden. Still worth getting a pro involved, I think she is getting a mortgage advisor so will see what they say.
I'm still not sure of any benefit to me unless we sell then I get half of the equity.
But good point about the 2nd home stamp duty.
deckster said:
No, it's the value of the outstanding mortgage. The bit which isn't mortgaged is considered a gift and therefore not subject to SDLT.
But good point about the 2nd home stamp duty.
I stand corrected and need to have a word with my accountant who gave me incorrect advice recently But good point about the 2nd home stamp duty.
pete_esp said:
we make a small loss on the flat every month.
So presumably you are making a deliberate bet on "capital appreciation". But don't forget a BTL will attract Capital Gains Tax at the enhanced rate when the property is eventually sold, so you need to look at the venture in terms of,- how much cash is tied up in it, and
- how much annual return is projected, net of that CGT.
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