buying someone out of their share of a house

maria1

hi all

My partner and her sister bought a house 2 years ago. My partner pays the mortgage and her sister paid the deposit. her wages were taken into account for the mortgage but now my partner could get the mortgage on her own wages alone. it was always agreed that this house was for my partner and me and that her sister's involvement would be temporary.

I want to financially contribute to the house but cannot get a mortgage due to my health and employment status. However I do have some money now and want to have my finanical input into the house recognised. I have paid for a lot of the furniture and fittings and pay my share of the bills and also other items.

Does anyone have any ideas on how I could invest in this property - can i buy the sister out of her financial interest in the house - ie pay her back the deposit and get the deeds changed to our names or to just the name of my partner alone - would the mortgage lender allow me to be on the deeds of the house even though i am not a borrower?

I just want to work out some ideas before I go off to the solicitor with my partner. So if anyone has any thoughts I would be grateful.

Maria

Victor

The house has most likely appreaciated in the last 2 years, so it will nly be fair that the sister gets more than the deposit back. If the deposit was 10%, she should get at least 10% of the current market value.

This type of thing is prone to difficulty and you should consider having 3 sets of solicitors involved (try to agree a fixed fee nota percentage), otherwise the new ownership situation could be challenged a few years down the road.

tomED

Are you living in the house? And if so for how long?

Correct me if im wrong - but once you have been living in a house with your partner for 2 years or more you are entitled to a percentage of the house anyway ( i know that doesn't answer your question)

I suggest talking with a solicitor to help you out.

Tom

Sleipnir

Have you broached the subject of buying her out?
Bear in mind that if her name is on the mortgage contract, she is legally entitled to half the value of the property, regardless of what you've put into it. Do you have reciepts for all you've bought for the property?

This will have been no investment whatsoever for her if she only gets the deposit back. As Victor said
"If the deposit was 10%, she should get at least 10% of the current market value"
She'll have seen the value increase over the past two years and may feel she's lost out if she only gets back what she put in 2 years ago and you (in her eyes) make off with all the profit on her investment.

Plus, if she was buying for the two of you, she may feel that you owe her for doing so (her name on the mortgage, so the risk was hers, you had no financial risk in the property)

The deeds belong to the mortgage lender until you pay off the mortgage so neither of your names are on it anyway.

The best thing to do is to ask the sister about her thoughts on you buying her out. Just get a feel for it before you instruct your solicitor to write a letter. Most people go on the defensive when they see a solicitor's letter!
Tell her your interested and could she think about what she would expect for it.
I hope it turns out alright for you, I know a brother & sister who don't speak to each other over the same type of deal!

uzami

if your partners salary is sufficient to service the current mortgage, the lender will take her off the mortgage if requested.......

..as for taking her off the deeds, you will have to broach the subject with her, and determine what she thinks is fair.

I do believe, as Victor said, that if she contributed to 10% of the purchase that she should recieve 10% of the capital appreciation, or whatever on a pro rata basis.

thegills

And don't forget that you'll be expected to pay all the solicitors fee's as you want a change in ownership / deeds etc.

I did something similar with my parents.

In 1997/98 I was looking at houses for 70k as that was all I could get. The folks said they'd give 30k and I could get a 100k house. I accepted, bought the house and we agreed to wait 5 years and then come to a solution. After 3 years however (2 years ago) they insisted I buy them out for 30% of market value which they said was about 150k. I had no choice but to borrow 45k and give it to them. At the time I was seething as they made 15k in 3 years and I was stuck with the additional motgage. The house price has kept rising though and if we had kept to our original agreement they would have owned about 75k as the house is now worth 250k. Instead I own the lot.

DaithiSurfer

Something similar happened to a friend of mine.
His Sister paid the deposit and he paid the mortgage.
They fell out and decided that he was going to buy his sister out.
When the solicitors got involved it turned out that its not just 10% (or whatever) + capital appreciation. They both contributed to bills, food, furniture, knik knaks, maintenance etc and the general running of the house. It was both their addresses for 2.5 years.
They house was bought by both and run by both for 2.5 years so was split 50-50 down the middle.

There was a name for this law but i dont remember it.

So you better be careful and not try to help one sister screw the other sister out of her house.
This is completely unfair and any solicitor will see this.
Does she know you are planning on doing this.
She won't take it well at all.
I know i wouldn't be impressed if it was done to me.

You'e not thinking of the couple of years worth of life that the poor girl pit into the house.
Also you have no way to prove that the other sis didnt give your gf money even though the mortgage came out of her account.

Also (big point here, it came up in the case). Add up the payments on the mortgage since she started paying it.

Divide by 2 (because she can only claim she paid her sisters half unfairly if at all).

Does that add up to the other sis's contribution?
Might even be less ...

Borzoi

Originally posted by Kananga


This will have been no investment whatsoever for her if she only gets the deposit back. As Victor said
"If the deposit was 10%, she should get at least 10% of the current market value"
She'll have seen the value increase over the past two years and may feel she's lost out if she only gets back what she put in 2 years ago and you (in her eyes) make off with all the profit on her investment.

I was having a little think about this and initially I'd agree with yourself and Victor, but consider this: If the property market had dropped would you pack back market value of 10% of the house, or would you have given back her deposit in full?

In that case most people would pay back what was given as deposit in full.

So, here, we are with 'the sister' who's making an investment and cant loose. Price goes down, she gets all her money back, price goes up, she gets all her money and a share in the profits.

Goes to show, don't make financial agreements with friends/family without thinking them out fully I suppose.