I bought a home with my brother-in-law, can I remove him from the mortgage? DAVID HOLLINGWORTH replies

I currently have a house valued at around £460,000 and an outstanding mortgage of £270,200 with NatWest due to close on 1 May 2024.

This was purchased with me and my brother in law. I had put down the entire deposit on the house and made all the payments but it was put on joint application to try and increase what we could borrow.

I will now need him to get out of the mortgage and he is also not expecting a payment from the house as this has been confirmed.

I need to know how I can get it out as I’m on a better salary now with my base being £80k and commission around £15-20k a year.

I have my car finance ending in November 2023 with outstanding credit cards totaling around £4000.

Will there be stamp duty if his share is transferred to me? There would be no money exchanged, nothing paid to him. It would simply be a case of removing it from the mortgage and deeds.

He expressed that he was happy to do so. What is the best way to approach this as it is giving me sleepless nights. AR, via email.

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David Hollingworth replies: High house prices pose significant challenges to anyone looking to buy a property, whether they are a first-time buyer or a mover.

Affordability remains one of the biggest hurdles despite some signs of house prices easing due to the current low levels of market activity.

It’s long been the case that parents are a critical part of the equation for any aspiring first-time buyer. It is not limited to the Bank of Mum and Dad and help from other family members may be required.

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Family Boost

Buying with your brother-in-law helped raise your income level so that the lender could be confident that the mortgage would be affordable, possibly at a time when your income was lower than it is today.

This effectively made it possible to take out a larger mortgage than you could otherwise secure on your own.

This made the purchase easier, but not only did you cover the entire monthly payment, but you also built up the deposit.

Therefore, the arrangement worked well for you, and your brother-in-law’s help was probably able to speed up the opportunity to buy your own home.

However, this can obviously have consequences for both of you.

First, it is structured as a joint owner as well as a joint borrower.

Some lenders now offer the option of placing the mortgage in joint names to increase the loan, but without requiring the property to be in joint names.

Here it appears that the property is owned equally between you.

Since your income position has now improved, it is understandable that you would want to take full ownership, which was probably the ultimate goal all along.

Your brother-in-law may also prefer to be removed from the property in the longer term, as he is jointly and severally responsible for the mortgage payments.

It can also affect what he can borrow in the future, as any other lender would consider this loan as a commitment.

It also means that if he buys another property or moves home, it will be an additional property and will therefore attract a 3 per cent surcharge on top of stamp duty land.

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Mortgage approval

Although there is often a need to buy out another owner, the only requirement here is to take over the mortgage in your own name and complete what is commonly called an equity transfer.

You will need to be able to prove that you can meet the lender’s affordability criteria on your own, and the lender will not simply release your son-in-law from the mortgage until they are satisfied that the mortgage is affordable.

Lenders will look at income and expenses when assessing affordability, rather than applying simple multiplication, but even considering just your basic salary, this would equate to less than 3.5x income.

Assuming there is a track record of regular commission payments, then this should only improve affordability and car finance payments will soon end.

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Transfer and stamp duty

There will also be some legal work involved and legal advice will be important to help you better understand the way forward and to help allay any concerns you may have.

You are right to ask whether there may be stamp duty costs as a result of a transfer of equity.

This will be calculated on the basis of the amount of ‘fee charged’ which will include not only any cash payment but also the amount of mortgage that is taken out.

In your case, there is no money to pay, but you will take on the other half of the mortgage.

This would equate to just over £135,000, which is nowhere near exceeding the current £250,000 stamp duty nil rate.

Therefore there shouldn’t be any stamp duty liability to worry about assuming you don’t own any other properties which would trigger an additional property tax.

The mortgage and legal advice should help you move forward and hopefully do so with confidence.