Pay down BTL to £79,999 before transfer of equity to spouse and then capital raising

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    Pay down BTL to £79,999 before transfer of equity to spouse and then capital raising

    Morning all,

    I've got a property coming out of it's fixed rate this week and it's held solely in my name. I would like to transfer half the equity to my wife. I understand if I do this with a mortgage over £80,000 then SDLT would be payable on the 'half' she is 'buying' (although no money will change hands).

    Additionally I want to move banks and to capital raise with a new BTL (current value around £150,000 to based on 75% LTV the new loan would be £112,500).

    So my question is, can I avoid SDLT by:

    - Paying my existing BTL down to £79,999
    - Completing the transfer of equity at the same time as applying for the new mortgage (which would then be in both our names) for £112,500)

    In my mind the consideration is half of the £79,999 at the point of the transfer as that is the existing debt and she is taking on half of £112,500 after the transfer and thus no SDLT is payable...

    Thoughts/opinions welcome

    #2
    I can't see anything wrong with that, but have a concern about the timing.
    I take it that the transfer of equity and the subsequent remortgage are some time apart.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      I think you can gift 50% interest to your wife and if her 50% interest comes with outstanding mortgage below £40,000 , she should escape paying sdlt.

      After the property is registered under your joint names, then you + wife can re-mortgage at £112,500 .

      Comment


        #4
        Thanks for your reply.

        My plan would be to be wrap it all under a single transaction but I fear this won't work as the 'consideration' might be considered to be the new mortgage amount and thus trigger SDLT.

        Other option of course, cashflow allowing is to clear the mortgage completely, do the transfer of equity with nil consideration and then immediately apply for mortgage of £112,500...



        Comment


          #5
          So to pass below threshold for paying sdlt , you need to make the the gift transaction at "below £40K consideration" to get your wife registered as joint owner. And you must allow 4-6 weeks for registration to complete at Land Registry.

          After LR registration has completed , the joint owners can proceed to " re-mortgage transaction" which has no sdlt.

          So you should expect to pay sdlt if you do both transactions at same time but check this out with a conveyancing solicitor before you act.

          Comment


            #6
            I agree with others that it is wise to leave a gap between reducing the exisiting mortgage and transferring half of the equity and between that and remortgaging.

            Originally posted by Gordon999 View Post
            you need to make the the gift transaction at "below £40K consideration" to get your wife registered as joint owner. And you must allow 4-6 weeks for registration to complete at Land Registry.

            After LR registration has completed , the joint owners can proceed to " re-mortgage transaction" which has no sdlt..
            For the record, there is no need to wait for the registration to be completed. Section 23(1) LRA 2002 says "Owner’s powers in relation to a registered estate consist of— [...] power to charge the estate at law with the payment of money" and section 24 says "A person is entitled to exercise owner’s powers in relation to a registered estate or charge if he is— [...] entitled to be registered as the proprietor". If A executes a transfer in favour of B, B is entitled to be registered as the proprietor. Everyone who buys with a mortgage executes the mortgage before he is registered.

            A transfer of equity can of course be done off the title.


            Comment


              #7
              Originally posted by Dan_Manchester View Post
              My plan would be to be wrap it all under a single transaction but I fear this won't work as the 'consideration' might be considered to be the new mortgage amount and thus trigger SDLT.
              It can't be a single transaction, even a connected transaction is pushing it.

              I don't think there's anything wrong with the plan, but any link from the new joint mortgage borrowing to the reduction in the previous mortgage lending would increase the consideration and make the non-payment of SDLT an issue.

              Your conveyancer should decline to proceed with no SDLT unless they're happy none is possibly due.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                If you are in the position where you can clear the debt and then transfer half the property to your wife then I would favour that option. It's a much cleaner way of doing it.

                Comment

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