Purchasing property shares from a spouse

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Pessy
Posts: 3
Joined: Wed Jul 22, 2020 12:39 pm

Purchasing property shares from a spouse

Post by Pessy » Tue Nov 01, 2022 11:25 am

Hello,

My spouse bought a house when I was not working. He is currently the sole owner of the house and paying the mortgage. I recently started working and I can now contribute towards the mortgage payment. How does this process go? Is it so that the property is valued afresh and I buy shares from my spouse based on the new value? I am unable to find this information anywhere. Thank you.



Purchasing property shares from a spouse

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AB2000
Posts: 5
Joined: Sat Sep 29, 2018 10:12 am

Re: Purchasing property shares from a spouse

Post by AB2000 » Wed Nov 02, 2022 12:11 pm

Pessy wrote:
Tue Nov 01, 2022 11:25 am
Hello,

My spouse bought a house when I was not working. He is currently the sole owner of the house and paying the mortgage. I recently started working and I can now contribute towards the mortgage payment. How does this process go? Is it so that the property is valued afresh and I buy shares from my spouse based on the new value? I am unable to find this information anywhere. Thank you.
Is there a reason to do this? At least, I would not recommend this, couple of reasons:

1- You land up paying another 2-4% of the property transfer tax (varainsiirtovero). :thumbsdown:

2– If the idea is to protect your contribution to the mortgage in the unforeseen sad-case of a divorce, all property and assets are anyhow split 50% UNLESS agreed via a pre-nuptial agreement.

3– Because of 2– above, your contribution is anyhow protected (UNLESS there is a pre-nup).

4– If you just want to make the payments, you can do that. But that being said, I would refrain and not recommend it. There's a reason for that too. I.e. in the worst case, these "#€%&/() idiots are likely to see you giving a "gift" to your spouse because you are paying your spouses share... and tax the spouse on the gift received, if following the letter to the law.

So my take on this as best as I understand? Avoid, and split it other ways.E.g. the spouse makes the house payments, and you can take care of the other expenses.

That's how I see it/ understand it.

As a side-note, If these a55h0!e5 had the choice, they'd turn all of us, including married couples into sex workers, taxing each person based on a presumed value of prostitution! Given a choice, they would even tax the breast milk per ounce. Apologies, have been here too long to deal with this nonsense.There's a lot more hate, absolute hate that I can spew on this topic, but I'll refrain. And for sure, you may have other views.

If you anyhow choose to do it, contact a LKV Kaupanvahvistaja, they'll help you and you need to pay them as well for this.

Pessy
Posts: 3
Joined: Wed Jul 22, 2020 12:39 pm

Re: Purchasing property shares from a spouse

Post by Pessy » Wed Nov 02, 2022 12:48 pm

Thank you for the response. I initially thought we just walk to the bank and say, okay, now I have work so I can buy 50% of the shares in this property. Or something close to that. But spouse says a new valuation has to be done and that will be the basis for the new valuation. Thank you, I'll seek further information from LKV Kaupanvahvistaja as you have advised.

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network_engineer
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Re: Purchasing property shares from a spouse

Post by network_engineer » Wed Nov 02, 2022 2:20 pm

As the reply above suggests: If there is an unforeseen case of e.g. divorce, this could create problems.

If you need details: Assume two equal shares for the property, e.g. Share A and Share B equalling a 100% ownership of the property. Your spouse has already paid the property transfer tax for the 100% ownership >> if you buy share B in your name, you will again pay the property transfer tax for share B.

Finally, if there is a divorce and you decide to purchase the full property, e.g. you decide to buy also share A from your spouse, you would be paying a property transfer tax on that too. So, all-in-all, the same property would have had the property transfer tax paid four times!!! The other option would be to sell the residence and then split the money received.

Even worse? IF the sale of the property occurs within two years of buying the property, then there is a capital gains tax on this as well and need to pay off a real-estate agent (kaupanvahvistaja and the bank involved, new loans etc.). You would need to get a loan in a hurry, and often this creates a stress in terms of the best interest rates and terms etc.

So, even as I see it, I am not sure if there is any-advantage-at-all to doing this.

Pessy
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Joined: Wed Jul 22, 2020 12:39 pm

Re: Purchasing property shares from a spouse

Post by Pessy » Wed Nov 02, 2022 4:56 pm

Thank you for highlighting these tax issues. How else can the purchase be done then? Thank you.

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network_engineer
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Re: Purchasing property shares from a spouse

Post by network_engineer » Wed Nov 02, 2022 6:46 pm

Pessy wrote:
Wed Nov 02, 2022 12:48 pm
... a new valuation has to be done and that will be the basis for the new valuation.
Yes, to a degree that is true. I.e. there is a minimum value that cannot be further undermined. E.g. if the market value of 50% shares is 150.000e, your spouse cannot sell it to you for 1000e.

There are implications to this, as the prices had risen considerably over the last years, and if the value of the shares is considerably higher than what was paid, easier to explain with an example: Let's say your spouse bought 100% of the property for 100.000e. If the current valuation is 300.000e, then for 50% ownership, you would need to pay 150.000e = a clear profit for the spouse.

In this case, IF you buy the property at 150.000e, then
  • the spouse can close their existing loan for 100.000e, and,
  • have a profit of 50.000e, and,
  • you have a debt/ debit of that amount (depending on if you pay cash OR take a mortgage for the 150.000e)
  • still retain 50% ownership of the house - to which they can stake a claim if there ever is a divorce
  • taking a conservative view, assuming it is an apartment 2% of 150.000e = 3000e property transfer tax
Again, as was listed earlier,
  • IF there is a prenup that excludes you to the property as a marital asset, then you are also not obligated to pay for the mortgage, i.e. neither your property nor your mortgage.
  • IF there is NO prenup and the property is a marital asset, then it is anyway a 50% division
Pessy wrote:
Wed Nov 02, 2022 4:56 pm
Thank you for highlighting these tax issues. How else can the purchase be done then? Thank you.
Well, it's your issue, but without a reason or an objective, it is hard to say. The options are given very clearly above.

Personally: I am wondering why exactly would anybody want to do this? I don't see any good reasons for this. Actually, there is just one reason, loss of a spouse. In that case, the 50% ownership just reduces the taxation on the "inheritance". Well, this is Finland, you are born to pay taxes ... :evil: But even that can be mitigated. So, I personally see no good reasons.

FinnGuyHelsinki
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Re: Purchasing property shares from a spouse

Post by FinnGuyHelsinki » Fri Nov 04, 2022 8:40 am

Pessy wrote:
Tue Nov 01, 2022 11:25 am
Hello,

My spouse bought a house when I was not working. He is currently the sole owner of the house and paying the mortgage. I recently started working and I can now contribute towards the mortgage payment. How does this process go? Is it so that the property is valued afresh and I buy shares from my spouse based on the new value? I am unable to find this information anywhere. Thank you.
If it is a house, is it also a real estate company? If not, there aren't any shares as such to be bought or sold. Of course it's possible to co-own something. You can decide between yourselves how you want to go about it; if you're thinking about buying the other half, consider the financial implications already mentioned in the thread. The process of selling a part of a property is similar to selling the full property, with a written bill of sale, what's being sold, the buyer and the seller and the sale price. There's no restriction for the sale price, but if it's significantly lower than the market price, the price difference is considered a gift and is therefore subject to gift tax.

Some couples have an arrangement where the other one (having earlier bought a house or an apartment in which both now live) pays the mortgage, and the other one chips in, paying something to cover some of the costs related to the dwelling. There's no one "correct" way to handle the situation, similarly as with any costs in a relationship, it's a matter of what you (you and your spouse) decide to do.


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