Girlfriend buying out my Business Partner

Denis11

Hi, could my girlfriend buy out my business partner in a house we own 50/50 with no mortgage. I assume because she would be buying this herself and the mortgage wouldn't be big she could buy my business partners 50% share of the house and we could both be on the deeds but the mortgage would solely in her name?

Dav010

Denis11 wrote: »

Hi, could my girlfriend buy out my business partner in a house we own 50/50 with no mortgage. I assume because she would be buying this herself and the mortgage wouldn't be big she could buy my business partners 50% share of the house and we could both be on the deeds but the mortgage would solely in her name?

Will a bank give her a mortgage on a property where the borrower(s) are not the sole owner(s)?

Ace2007

Denis11 wrote: »

Hi, could my girlfriend buy out my business partner in a house we own 50/50 with no mortgage. I assume because she would be buying this herself and the mortgage wouldn't be big she could buy my business partners 50% share of the house and we could both be on the deeds but the mortgage would solely in her name?

That has the potential to become very messy - what if she can't pay, banks can't reposes 50% of a house?

What if you break up?

Have got to assume it's not your PPR at the moment, so you business partner might have to pay CGT - does he know this?

Is the house an asset of the business?

antix80

Ace2007 wrote: »

That has the potential to become very messy - what if she can't pay, banks can't reposes 50% of a house?

What if you break up?

Have got to assume it's not your PPR at the moment, so you business partner might have to pay CGT - does he know this?

Is the house an asset of the business?

The bank wouldn't repossess 50% of the house. They would repossess 100%.
So what if they break up?
Why would you assume it's not his PPR?
Why would op be worried about another guy's CGT?
Why would you assume the house in an asset of the business?

A little knowledge is a dangerous thing.

endacl

What will you do if you find out this terrible idea is actually possible, but your friend doesn’t want to give up his share of an appreciating asset?

Best just sell, and use your half to do whatever it is you want to do.

antix80

Dav010 wrote: »

Will a bank give her a mortgage on a property where the borrower(s) are not the sole owner(s)?

Yes, but both parties will be jointly and severally liable for the loan. (sorry I don't have a source, but that's my understanding)

It would mean if the girlfriend stopped paying and the op didn't take over payments the op will be liable and could lose the house.

antix80

endacl wrote: »

What will you do if you find out this terrible idea is actually possible, but your friend doesn’t want to give up his share of an appreciating asset?

Best just sell, and use your half to do whatever it is you want to do.

It's not a terrible idea. Unmarried couples buy houses together all the time.

The business partner and op will obviously agree a price.

Op will need to protect himself by ensuring the solicitor writes up a document outlining what will happen in the event of relationship breaking up/non-payment by gf. Couples often skip this piece and I know a lot of people (mainly men) were burned badly during the recession when their ex stopped paying the mortgage but still had a 50% stake in the house.

Ace2007

antix80 wrote: »

The bank wouldn't repossess 50% of the house. They would repossess 100%.
So what if they break up?
Why would you assume it's not his PPR?
Why would op be worried about another guy's CGT?
Why would you assume the house in an asset of the business?

A little knowledge is a dangerous thing.

Can the bank kick out someone who owns 50% of the house and whose not on the mortgage???

He bought it with a business partner - why mention it was a business partner, why not just say a mate, bringing the word business into it implies that it would be related to the business, and hence an asset of the business.

On the CGT part, if he's a business partner or mate - i wouldn't want to screw him over with a potential tax liability if it wasn't a PPR.

Dick Turnip

endacl wrote: »

What will you do if you find out this terrible idea is actually possible, but your friend doesn’t want to give up his share of an appreciating asset?

Best just sell, and use your half to do whatever it is you want to do.

I really don't get this post?

My understanding - 2 friends bought a house. Now one of those (the OP) has a long term girlfriend who wants to buy out the other owner. What is so terrible about that? If anything it makes the most sense. Things will only start to get messy if the other guy doesn't live there but the couple want to start making improvements to the house etc

In your scenario, the friend doesn't want to sell to the OP's gf but your advice is for the OP to sell his?

Ace2007

antix80 wrote: »

Yes, but both parties will be jointly and severally liable for the loan. (sorry I don't have a source, but that's my understanding)

It would mean if the girlfriend stopped paying and the op didn't take over payments the op will be liable and could lose the house.

But the OP wont' be on the mortgage application and so he's not liable for the loan, He's only liable if he's on the mortgage.

antix80

Dick Turnip wrote: »

In your scenario, the friend doesn't want to sell to the OP's gf but your advice is for the OP to sell his?

antix80

Ace2007 wrote: »

But the OP wont' be on the mortgage application and so he's not liable for the loan, He's only liable if he's on the mortgage.

He'll be handing the deeds of his house over to the bank and likely signing whatever paperwork the bank requires to make the loan happen.

phormium

Usually banks want both owners on mortgage but can live with one on deeds if needs be, not so happy though to do it the other way around which is what you are suggesting.

Ace2007

antix80 wrote: »

He'll be handing the deeds of his house over to the bank and likely signing whatever paperwork the bank requires to make the loan happen.

But he's not going to be on the mortgage application and hence he wont' be liable for any loan. The only way he could become liable is if he went guarantee for it.

What your saying is true if he went on the mortgage application.

Del2005

antix80 wrote: »

He'll be handing the deeds of his house over to the bank and likely signing whatever paperwork the bank requires to make the loan happen.

The OP's business partner will be selling their 50% of the property to the OP's partner. The OP's 50% of the property has nothing to do with the deal. Which is why its highly unlikely that a bank will provide a mortgage, 2 separate mortgages on one property!

If the OP and their partner both buy out the business partners share them a bank might be willing to lend, but that's also very messy as the OP will then own 50% with one mortgage and the other 50% jointly with a different mortgage.

Ace2007

Del2005 wrote: »

The OP's business partner will be selling their 50% of the property to the OP's partner. The OP's 50% of the property has nothing to do with the deal. Which is why its highly unlikely that a bank will provide a mortgage, 2 separate mortgages on one property!

If the OP and their partner both buy out the business partners share them a bank might be willing to lend, but that's also very messy as the OP will then own 50% with one mortgage and the other 50% jointly with a different mortgage.

The OP doesn't actually have a mortgage on the property. The cleanest and most likely way to get a mortgage would be for the OP and GF to get a join mortgage and buy out the Business partner, but this then mean the OP is liable for the full mortgage should the gf stop paying (and vice versa)

Just to add though doing this would mean that the gf wouldn't be a FTB, and so might they will need to stump up 20% of the deposit to buy the partner out

Claw Hammer

Ace2007 wrote: »

But he's not going to be on the mortgage application and hence he wont' be liable for any loan. The only way he could become liable is if he went guarantee for it.

What your saying is true if he went on the mortgage application.

The bank will want their loan secured by a charge on the property, which is wat a mortgage is.
They will want the ability to repossess the property in the event of default. The only way a bank will allow this is if the o/p consents to a charge on the property in favour of the bank.
What the o/p would need to do is agree to that and have his gilrfriend, who should be separately legally advised, sign ban agreement that the equity in the house is his to the extent of 50% and hers to the extent of the difference between the amount remaining on the mortgage at and time and 50%. It should also be provided that both should be equally liable for maintenance, insurance and the cost of improvements. In the event that one pays more that the other for maintenance, insurance and the cost of improvements, the equity of the property should be adjusted. The agreement should contain an arbitration clause.

jimmycrackcorm

Op, to do what you want would require a joint mortgage application. Your equity in the house would suffice as a deposit and as long as her income falls under the 3.5 times rule there should be no problem for the half required to buy out. No bank will give a mortgage for half a property.

If this isn't your PPR then there are tax issues for you to consider as effectively you are also selling the house as well as buying into it again.

Claw Hammer

jimmycrackcorm wrote: »

Op, to do what you want would require a joint mortgage application. Your equity in the house would suffice as a deposit and as long as her income falls under the 3.5 times rule there should be no problem for the half required to buy out. No bank will give a mortgage for half a property.

If this isn't your PPR then there are tax issues for you to consider as effectively you are also selling the house as well as buying into it again.

That is not the case. The girlfriend would be buying the equity of the business partner. the o/p would simply be consenting to a charge.

Ace2007

Claw Hammer wrote: »

That is not the case. The girlfriend would be buying the equity of the business partner. the o/p would simply be consenting to a charge.

Would you be willing to do this? He might not want to put a charge to his house - no where did he say he was open to this idea.

Given the two mates bought the house mortgage free and 50/50 the op must have either bought in a rural area, at the bottom of the crash, or must have lump a lot of money and invested it into the property - if it’s the latter I doubt he wants to give up the charge in case his current gf stops paying

Claw Hammer

Ace2007 wrote: »

Would you be willing to do this? He might not want to put a charge to his house - no where did he say he was open to this idea.

Given the two mates bought the house mortgage free and 50/50 the op must have either bought in a rural area, at the bottom of the crash, or must have lump a lot of money and invested it into the property - if it’s the latter I doubt he wants to give up the charge in case his current gf stops paying

That is for the o/p to decide. There is no way that the bank will facilitate the transaction any other way. If he doesn't want a charge on the house he will have to veto the deal. How he funded the purchase originally is irrelevant.

jimmycrackcorm

Claw Hammer wrote:

That is not the case. The girlfriend would be buying the equity of the business partner. the o/p would simply be consenting to a charge.

That would be the case if the GF had cash to buy out that equity.
But as she needs a mortgage, it totally changes the nature of the transaction.

Claw Hammer

jimmycrackcorm wrote: »

That would be the case if the GF had cash to buy out that equity.
But as she needs a mortgage, it totally changes the nature of the transaction.

It is the same transaction. The need for a mortgage just adds complications.