Buying out a sibling from an inherited house

Our experienced team of independent financial advisers at PIL Southampton is often asked about what to do if you inherit a property with your sibling and you want to buy them out. In this article, we explore this topic and offer useful advice if you find yourself in this situation.

What are my options if I inherit a house with my siblings? 

If you all agree, you can sell the home and share the proceeds. Alternatively, siblings may agree that one sibling is going to keep the property and buy the share/s of their sibling/s. 

Whether you’ve all been left an equal share of the property, or if the parents chose to divide the ownership of the property differently, everyone needs to agree on what happens to the property, no matter how large or small their share is.

What happens if one sibling is buying out another? 

If one sibling is buying out another, then they will need to agree on the value of the property, and raise the funds needed to pay for their sibling’s share of the property. 

Can I get a mortgage to buy out my siblings? 

You can get a mortgage to buy out your sibling/s’ share of the inherited property. Although the mortgage application will be just like applying for an individual mortgage in any other situation, the potential complexities of inheritance and probate mean that we would advise you to take legal advice, and to speak with a specialist mortgage broker, like the team at PIL Southampton, before starting the mortgage application process.

Being independent financial advisers, the same professionals at PIL Southampton will be able to give you tax advice in this scenario too.

What do you need to buy a sibling out of an inherited house in the UK? 

Usually, when you apply for a mortgage, your mortgage lender is likely to require at least 5% of the value of the property in the form of a deposit.

However, when you are buying out your sibling’s share you have probably been gifted a 50% of the property, which you can use as your deposit.

This substantial figure will give you an attractive loan to value ratio, which should mean that your mortgage offers will have comparatively favourable interest rates.

How to buy out siblings on inherited property 

Find out sibling share 

In most cases, you and your siblings will have inherited the property as ‘joint tenants’, which is the most common ownership arrangement when inheriting property. In this scenario, each sibling will have equal rights to the property and therefore the value of the property will be equally split.

However, if it’s a ‘tenants in common’ arrangement, the siblings may each hold a different share in the property. The higher the share of the property your sibling holds, the more money you will need to buy them out.

Agree on a price 

It should be straightforward agreeing on a price, once you have established each sibling’s share in the property, and you have had the property independently valued. You might find that enlisting a solicitor or mediator to negotiate this process could make things run more smoothly and help to protect your familial relationships, as money can sometimes make a situation contentious.

Contact the Land Registry 

When the decision has been made for you to buy out your sibling/s’s share of the property, you need to formally submit a document to that effect to the Land Registry, recording your intent.

You will also need to send the grant of probate to the Land Registry, signed by you and your other sibling/s. 

Many people find using a solicitor for this process helpful, to ensure that all the paperwork is filled out correctly and the right outcome is achieved as quickly and as efficiently as possible.

Do I have to pay stamp duty when buying out a sibling? 

Yes, you will be liable for Stamp Duty Land Tax (SDLT) on the value of the share of the property that you are purchasing from your sibling/s. This works in the same way as the Stamp Duty due with any transfer of equity in any shared ownership property.

It’s important to note that, if you buy your sibling’s share of the property but you agree that they will continue to live there, and you live in another home, you must declare your ownership of the inherited property as a second home. This would mean that you would have to pay a 3% second home surcharge on the share of the inherited property you are buying out.

What other fees do I need to consider when getting a mortgage to buy out a sibling? 

Just like with any other mortgage application process and house buying process, you are likely to need to pay valuation fees, mortgage fees, and legal fees. 

What happens if siblings cannot agree, and a forced sale is needed? 

If you and your sibling/s can’t agree on what should happen about the sale or buyout of a share of an inherited property, and communication between you breaks down, then you could ask the courts to adjudicate.

At this point, the court would be asked to consider an application for an Order for Sale under the Trusts of Land and Appointment of Trustees Act 1996. 

They would examine the intentions of all parties, including the siblings, when the property was inherited, and the purpose of the trust was defined. They will also consider the welfare of any minors who are living in the property or who are trustees. They will also consider the interests of any secured creditors.

How PIL Southampton can help you 

Our qualified, knowledgeable team is well-equipped to steer you through the process of buying out siblings from an inherited property.

We can help with the parts of the process that can sometimes be complex when inheritance and probate are involved, and we will do our utmost to make sure you secure the best mortgage available to suit your needs and circumstances.

How you can contact PIL Southampton

You can email us, fill out the contact form on our website or call us on 02380 668407. We look forward to hearing from you.