Remortgaging for Buy Out

D

Dingo

Registered User
Messages
27
Hi,
Not sure if the title is appropriate for the question I am about to ask.

Basically here is my situation.

I part own a house with my brother. We bought the house 4 years ago for 275K. The house is now worth approx 420. That's based on what similar properties are selling for in the area.
We took out a mortgage on the house for 245K, which we have been paying for 4 years.

I no longer live in the house, my room is rented, but I still pay 150 a month to cover insurance and the shortfall in the rent. I live with my fiance now in his apartment and I pay 400. My fiance owns his apartment, which he bought 2 years ago.

We are getting married in June and want to buy a house in a better area. In order to fund this, we're going to have to sell the apartment, and somehow, I am going to need to get my equity out of the house.
My brother is not interested in selling, but I cannot afford to take out a second mortgage and my fiance will not be able to afford a house on his own.

Our best option is that my brother buys me out. I'm just afraid that this will get really messy,and even though we'll say we'll do it as fair as possible, what's fair? However, without being sentimental and subjective, how would this work?

House worth 420
Original mortgage 245
Original Down payment 30K (15K each)
Not sure how much has been paid off the mortgage, although I shouldn't imagine that it would be a whole lot.

With this information, can anyone best guess how much equity I should expect to receive at a value of 420? What would my brother have to do to pay that money to me?

It's probably not as complicated as I am making out but I haven't thought much about it or had any advice.

If anyone can help, that would be great.

Thanks
 
Hi Dingo,

It appears that you and your brother have been keeping the house on a 50/50 basis from the start, which makes it simpler. If so, you just need to get a market valuation of the house and ask your lender how much is now outstanding on the loan.

Let's say for simple figures you now owe €230,000 on the mortgage and the house is worth €420,000. If you were to sell the house, you'd clear €190,000 profit. There might possibly be a Capital Gains Tax implication for you - you'd need to check with a tax professional. Your post suggests that your brother has lived in the house for the full four years so he shouldn't have a CGT implication on selling.

So my simple answer is that your brother owes you €190,000 / 2 or €95,000 to buy you out. He can either sell the house and give you €95,000 out of the sale proceeds or he could look at re-mortgaging it on his own to buy you out. He'd need to be able to get a new mortgage of €230,000 (?) existing balance + €95,000 = €325,000 on his own to do this.

Liam D. Ferguson
www.ferga.com
 
That's really helpful thanks a million. I will do my research into the CGT. In relation to the CGT, as far as revenue are concerned, I still live there. Everything in my name is registered to that address. While we have a lodger, my room is still actually free, so in theory I can of officially still live there.
Would you know if I would then be ok and not have to pay it?
 
Hi Liam

Thanks for that. I think you are right, best to consult a tax advisor.
You've been very helpful, much appreciated.

Thanks again !
 
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