How does Right to Buy Discount effect Equity Dispute?

Question

Me and my bro brought my dads house using his right to buy discount and now my bro wants out.

He's saying he should get 50% equity but we've pay interest only for 3 years so the whole mortgage is left for me to pay

Should we include the discount when calulating the equity or not?

Answer 1

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Answer 2

I would first wonder and question why your brother wants out of the deal. Is he hurting for cash and looking for an easy out? His reason may be deeper rooted than you realize.

If this is not the case, then cut your losses and pay out half of what he put in. You will most likely gain a profit in the end, and he will lose out on that. But, on the other hand, a contract is a contract. there should be a penalty clause for breaking it early.

Will this put you in a financial situation where you will have to re qualify without him? Dealing with financial situations is difficult by itself without the complications of emotions and the love and devotion of family members as part of the deal/contract. Good luck.

Answer 3

I am trying to understand how you could buy the house on your fathers right to a discount?

However I think if he wants out then you have to remortgage in your name which will mean you buying the house at its present value from the partnership of you and your brother. Your brother taking his half of the money so raised and you putting your half back into the purchase in your own name.  

Answer 4

That would be a personal decision agreed upon between both of you.  However, the fact that both of you were able to purchase the property at a discount from market value has no bearing on the current market value of the property.

Existing equity is based upon the current market value of the property less the amount owed on the mortgage.  Sadly, the two of you apparently did not agree aforehand on how to handle this if one of you wanted out.

Think of it this way, however.  If BOTH of you wanted out, would you pass this discount on to a buyer neither of you knew ?  I think not, and your brother need not pass it to you either, simply because you are his brother.

Answer 5

No.  When the house is sold (or appraised) only the actual realized equity (the amount of money the house is valued minus the expenses (of the sale) and the mortgage pay off) should be split.  It is reasonable to include the expenses of a new mortgage if one is needed.