Joint mortgage with sibling - options

First time poster

I bought a house with my sibling 5 years ago. We have a joint ownership agreement. Initially we both lived in the house. He moved out two years ago to rent with his partner. My partner moved in and pays rent which cover's my siblings half of the mortgage repayments.

The remaining mortgage to be paid is around €280K and the house is currently valued at €380K.

My sibling now wants to buy a house with his partner. This means either (a) selling the house to release the equity so that he will have a deposit or (b) buying me out - his partner has some money and they would consider buying me out (I can't afford to buy my sibling out at present).

I personally don't want to sell, however, can anyone advise on how we would calculate an appropriate amount to buy the other one out?

Is it simply:

Current est value €380k minus remaining mortgage €280k = €100k then half of that which = €50K ?

Are there any tax implications which we should be considering i.e. how to do it tax efficiently.

If one of us buys the other out will the buyer need to get a new mortgage and pay a deposit again ?

I'd like to get professional advice - who should I talk to - a mortgage advisor? a solicitor ? the bank manager ?

Many thanks in advance.

There is no CGT on principal private residences PPR. Is there an actual gain though? What was the purchase price. The person who moved out, it is no longer the PPR.

50K equity each. Presuming both paid the same deposit and repayments. In essence your sibling needs to pay you 50K and have a new mortgage in your name only.

Alternatively, you need to get the mortgage in your name 280K plus 50K extra from bank - ask the bank is this possible. Maybe with youand your current partner. If that partner is long term ! Or another fine mess to be made.

Hi Bronte, thanks for the reply.

There's not a big gain - Purchase price was €320k, plus an additional €40k (€20k each) went into an extension soon after purchasing. Deposit and repayments split 50/50.

We're both below average industrial wage so even if one of us could buy the other out, under the new mortgage regulations it looks like neither of us would be likely to be able to get a mortgage on the house

New mortgage regulations will not apply here. House is valued at 380K. Mortgage required 330k (280 + 50). Either party can buy out the interest of the other with either cash payment or increase in bank mortgage. Provided that both parties agree on 50K being a fair price for the 50% net equity. Existing bank can then be approached to see whether they would be prepared to extend an additional 50k to finance he buy-out. main criteria will be affordability of the new mortgage amount. That might be an impediment!

You say you have a joint ownership agreement. Does it say anything about buying out the other person?

I presume that it's an SVR mortgage and not a tracker?

If you had contributed equally to the deposit, and made equal repayments up to now, then it would be very simple to calculate each person's equity - €380k -€280k = €100k/2 = €50k.

Does the fact that your partner is paying rent change that? If he is paying a market rent which happens to be the same as half the monthly repayment, then probably not.

You and your partner will require mortgage approval of €330k, so you will need around €100k of joint income between you. I presume you don't have that. I am not sure why the new mortgage regulations wouldn't apply, but it wouldn't make sense for the bank to lend you more than 3.5 times your salary anyway.

If you don't qualify, would your brother and his partner qualify? If she has cash, they won't need to borrow €330k.

The simplest thing would be for whoever can afford it, to buy the other out.

If you want to retain a stake in the property market, you could reverse the present arrangement and let your brother and his partner move into the house. You move out but retain your stake. A bit messy, but it would keep you in the market.

What is your combined income? Why don't you and your partner apply for mortgage approval on the basis that you are selling the house and will have paid off the mortgage? That will tell you what you can afford. If you can't afford a house for €380k, maybe you can buy a house for a bit less. Maybe your brother will help you by "overpaying" for your share of the current house.

Brendan

Brendan Burgess said:

You say you have a joint ownership agreement. Does it say anything about buying out the other person?

I presume that it's an SVR mortgage and not a tracker?

If you had contributed equally to the deposit, and made equal repayments up to now, then it would be very simple to calculate each person's equity - €380k -€280k = €100k/2 = €50k.

Does the fact that your partner is paying rent change that? If he is paying a market rent which happens to be the same as half the monthly repayment, then probably not.

You and your partner will require mortgage approval of €330k, so you will need around €100k of joint income between you. I presume you don't have that. I am not sure why the new mortgage regulations wouldn't apply, but it wouldn't make sense for the bank to lend you more than 3.5 times your salary anyway.

If you don't qualify, would your brother and his partner qualify? If she has cash, they won't need to borrow €330k.

The simplest thing would be for whoever can afford it, to buy the other out.

If you want to retain a stake in the property market, you could reverse the present arrangement and let your brother and his partner move into the house. You move out but retain your stake. A bit messy, but it would keep you in the market.

What is your combined income? Why don't you and your partner apply for mortgage approval on the basis that you are selling the house and will have paid off the mortgage? That will tell you what you can afford. If you can't afford a house for €380k, maybe you can buy a house for a bit less. Maybe your brother will help you by "overpaying" for your share of the current house.

Brendan

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Brendan - thanks for the feedback and for the alternative suggestions - they're options worth considering.

The co-ownership agreement says that if one of us wants to sell we must give the other notice (6 months) and first option to purchase the share at open market value.

It's a fixed rate mortage, currently at 4.89 % (which stings).

We contributed equally to the deposit, and repayments while my sibling lived in the house. For the last two years my partner's rent has not quite covered half the repayments - shortfall of €110 p.m. which I make up as I have the benefit of living in the house. My siblings only expense in relation to the house is the property tax.

Really appreciate your insights.

OK, so €50k is a fair estimate of the equity.

So he gives you 6 months notice that he wants to sell the house.
You can buy it if you can get loan approval.
otherwise he can buy it if he can get loan approval.

That seems fair enough. You should seek loan approval to find out where you stand.

Brendan

That's good advice - thanks again Brendan.