Bought with a friend, but now selling up?

A reader from London has bought a property with a friend – but now wants to move out and buy a home with his partner. However, he is worried about stamp duty.

Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes him through the problem.

Andrew from London asks:

I bought a flat with a friend four years ago as an investment (50/50). We have lived there since, but I would now like to buy a house with my girlfriend and handily, his mother would like to buy out my share of the flat.

We purchased the property for £247,000 with a mortgage of £172,000. We now have £160,000 left to pay on the property and I have agreed to sell my flatmate's mother my share of the property for £100,000 - so she will have to pay £180,000 in total: to pay of her half of the mortgage, cover my initial deposit and the amount the property has gone up in value.

What I would like to know if what fees we will be liable for. Am I right in thinking she will have to pay one per cent stamp duty land tax (SDLT) on the transfer of equity?

Also, what sort of solicitor's fees are we likely to face?

Many thanks!

Tony at Mortgage Meadow replies:

Hi Andrew,

Thank you for your question.

Stamp duty is payable on the amount your friend's mother wishes to purchase the property for, in this example £100,000, plus your 50 per cent share of the mortgage which would be £80,000.

This would mean that the stamp duty liability would be based on a total figure of £180,000. The stamp duty due on this amount is one per cent, which is £1,800

Unfortunately solicitor's fees can be as long as a price of string, depending on the quality of the firm and the speed of the service that you require. So it is worth shopping around for the best deal. I would suggest your friend's mother budgets for a base solicitor cost of between £400 and £600 and a further £600 or so for disbursements.

I hope this helps.

If you have a question for Tony, go to the myfinances.co.uk Ask the Mortgage Expert section.

Or for more information or mortgage advice go to Mortgage Meadow.

Mortgage Meadow is an independent mortgage broker and is authorised and regulated by the Financial Services Authority.