Transfer of equity - Adding wife to Title the proper way

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    Transfer of equity - Adding wife to Title the proper way

    Hi all

    A while ago I created a post about adding my wife to my solely-owned BTL's as I am a higher-rate tax payer and she does not work. I created this post about a deed of assignment. I got some good responses on there and decided not to go ahead as there were too many red flags.

    I have now decided to do it the proper way...
    1. Get my wife added to the mortgage and property title as Tenants in Common
    2. Get a Declaration of Trust drawn up giving her 99% ownership.
    3. Submit a Form 17 to HMRC within 60 days
    I believe that is the proper way to do things (correct me if wrong) however I do also have a question about stamp duty.

    The BTL property currently has a mortgage of £200k. Now which of the following is true?
    1. I transfer half of the mortgage to my wife - £100k. As this is below the stamp duty threshold, there is no stamp duty to pay. It is only half as the declaration of trust is done AFTER the mortgage has been transferred and after my wife has been added to the title.
    2. I transfer 99% of the mortgage, which works out to be £198k, with a stamp duty bill of £1,460. According to one solicitor, the mortgage split should reflect the ownership.
    I have been told different things by different solicitors so just want to confirm the above.

    #2
    1. The stamp duty will be the surcharged rate, because this is not your only property. It will be based on half of the mortgage value as the mortgage will be joint and considered to be split 50:50 for tax purposes.

    2. If you were transferring 99% of the property, this would be true (although the stamp duty calculation is wrong - see above). However, the problem from your previous posts remains. I remain convinced that the mortgage lender won't allow a joint mortgage with the property ownership 99:1 when it is taken out.
    And they won't allow you to change it to that position afterwards either.

    You would be personally liable for all of the mortgaged amount secured against 1% of the equity in the property.
    Even if the lender was being entirely reasonable about liability and regarding you as only liable for 50% of the loan amount, that problem persists.

    As you're going to be taking out a new loan, doing so with the knowledge that you are about to change the ownership would need to be declared to the lender, otherwise I suspect it would be fraud (because of the questions that will be asked on the application).

    There may be lenders who are happy with the arrangement that you propose, it's not uncommon, after all, but I've no experience to support that view.
    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
      Thanks for your response.

      Originally posted by jpkeates View Post
      1. The stamp duty will be the surcharged rate, because this is not your only property.
      The higher rate stamp duty does not apply to married couples. Similar to capital gains tax. So based on what you say, the stamp duty should be nil.


      Originally posted by jpkeates View Post
      I remain convinced that the mortgage lender won't allow a joint mortgage with the property ownership 99:1 when it is taken out.
      And they won't allow you to change it to that position afterwards either.
      I have had a call with my lender and they've said there wouldn't be an issue, provided my wife meets the affordability checks.

      Comment


        #4
        Originally posted by Madmax86 View Post
        The higher rate stamp duty does not apply to married couples. Similar to capital gains tax. So based on what you say, the stamp duty should be nil.
        I didn't know that, thanks.
        I have had a call with my lender and they've said there wouldn't be an issue, provided my wife meets the affordability checks.
        Good to know, be interested in seeing how you get on.



        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


          #5
          Originally posted by jpkeates View Post
          I didn't know that, thanks.


          Yeh I only found that out the other day when my accountant told me. I did some research and his story checked out, so that was a huge relief. It's just a shame I didn't do this during the stamp duty holiday earlier this year.


          So my post above was trying to find out if the mortgage split needs to match the title split. I would obviously prefer option 1 and splitting the mortgage 50/50 as it will mean no stamp duty to pay. So hoping someone can advise on that. I might call my mortgage lender and see if they can advise.

          Comment


            #6
            The tax is based in the consideration for the "gift", so it should be based on whatever the split is at the point of transfer.
            So as long as you wait a bit before then doing the deed and form 17, you should be fine.

            You don't want the two events to be linked.
            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


              #7
              Yes this is what I'm thinking.

              So to confirm I would add wife to title and mortgage (tenants in common). Once complete and added to LR, only then start looking into DOT?

              Also when submitting the initial documents for adding wife as tenants in common, do I need to state a split at that point? Or is that the job of the DOT after?

              Comment


                #8
                Originally posted by Madmax86 View Post

                Also when submitting the initial documents for adding wife as tenants in common, do I need to state a split at that point? Or is that the job of the DOT after?
                I think I've just answered my own question. I've had a look at the TR1 form which I will be filling out and there is no mention of declaring a split, just a checkbox to say we will hold the property as tenants in common.

                Comment


                  #9
                  You don't want to state a split in the deeds, because then you can change it without bothering them later.
                  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

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