Help regarding mortgage please!

[catinthehat46]

Posting here for traffic..

So my partner and I have recently split up, we own a house together have a joint mortgage and I would like to buy him out. He put in the £8k deposit and I paid the fees which were around £2k-£3k. We split mortgage & bills 50/50 and contribute the same each month.

How do I go about this? What is the fair way to do it? Also, how does buying someone out compare to transferring of deeds? This is my first owned home so I'm not sure of my options.

He has thrown all sorts of figures at me during discussions about this, ranging from 'pay me £4K and I'll walk' up to 'you owe me £8K for starters'. We only bought the house 2 years ago so I don't imagine they'd be much equity in it.

TIA.

Well you don’t owe him £8k for starters, because you paid £2-3k. I’d offer him £5-6k and see if that works. If not you might need to seek legal advice.

I guess I would start by thinking he has put £5k more than you in. So you would need to buy out his 50% plus £5k?

Would the mortgage company let you take on the mortgage alone?

My DH bought with his ex, mortgage company wouldn’t let him but her out as he didn’t meet affordability criteria. Eventually he and I did it after 4 years together.... legal fees were about £300 ish.

Are both of your names on the mortgage?

You need to formally decide between you what works best for you both for his share to leave.

It's tricky though, and you might want to ask CAB or a solicitor. But in my personal opinion, I'd say you owe him the extra he paid at the start, above what you paid, so £5k.

I wouldn't pay him half the equity (if any) personally, as if you were to sell up, then that equity would be swallowed by fees anyway. So it's all relative.

Also, it's not just a simple case of amending the deeds. If you're both on the mortgage, to remove him from the mortgage means the lender will want you to make an application for a new mortgage to ensure you can afford it.

When I split with my ex-H. I couldn't 'afford' to buy him out according to lender, even though I'd taken over the mortgage and was paying it each month and he was living with new GF. Thankfully, we were on good terms and he let me hold off a few years to progress in my career to earn enough to buy him out.

Worth speaking to a broker to see what mortgage you can get including increasing the borrowing by £5k to pay him off, if you don't have that cash to hand.

Good luck. PM me if I can help in any way, having been through it.

First of all you need a current valuation, he will be due the deposit minus the fees plus 50% of any increase in value

If you want to buy him out, you need to get some valuations for what the house is worth now. It may actually be worth less than what you paid, depending on where you are. In which case it becomes complicated and you may not want to buy him out. If it’s worth more than you paid, you pay him the £5/6k more that he put in to begin with plus 50% of the rise in price.

Start up costs were £11k (8+3) so if you were splitting equally, would have been £5.5k each. So to settle that, pay him £2.5k.

You will then need to speak to an advisor as you'll mostly likely need to go through a lending application again to ensure you can afford the property yourself.

Depending on your mortgage, check any early repayment charges and conditions which may be payable, but something your advisor can assist with.

Any new lending would most likely require a valuation of the house.

You would owe 50% of any value increase. I'd then split legal fees and any mortgage fee discharge 50/50 too. Although depending how legal fees are billed, if you have one fee for the removal of him, that'll be 50/50. but any fee relating to setting up deed in your own name and new mortgage costs in your name would be your own.

I have just done this, process completed last month.

First thing is to call lender and check if you meet affordability! If you do, it’s easy, you go through the application process with the lender and then engage a solicitor to do a “transfer of equity”. To do this, we arranged for me to pay him his share of the deposit in a private arrangement as it became a much more complex legal arrangement to do the money through solicitors.

If you don’t meet the criteria you can try other lenders but beware early repayment charges on the mortgage. We were in the unfortunate position that our lender did not regard me affordable but another lender did. Unfortunately I could not switch lenders as the charges were huge so I had to wait until I got a payrise and current lender saw me as affordable.

Yes both names are on the mortgage. I could afford it on my own yes but know the mortgage company will need to do affordability checks. I think I will go down the route of offering £5k/£6k and see how that goes.

Thanks for all the replies, really helpful and appreciated.

Don’t offer him any money until you know whether the house is in negative equity. If it is you’ll find it hard (or impossible) to remortgage without putting extra money in. And you’ll be taking on the negative equity alone.

Do you hold a joint tenancy or are you tenants in common? If the latter is it a 50/50 ownership?

elphame It's a joint tenancy

moonlight The house is worth at least £5k-£6k more than when we bought it. Between what is left to pay on the mortgage and slight increase in value there should be around £20k equity I would think.

It is still a legal transfer of title. You'll need a solicitor though as a previous poster said the mortgage co often refer you to someone.

Why are you offering £5/6k? The majority of posters on here have worked the maths out incorrectly.

The start up costs were £11k; you put in £3k and he put in £8k. Half of £11k is £5.5k so you should only offer the difference i.e. £2.5k.

I’m sure you can do transfer of equity through the mortgage company,
They just send the relevant paper work. Obviously when they know you can afford to take the mortgage on alone.
Check with them .

there should be around £20k equity
Surly you owe him 10k. If you both own the house equally you split the profits equally. Isn't that what he would get if he takes it to court?

Whoever keeps the house is, in effect, keeping the 8k deposit. He owes you 1.5k towards fees (sunk costs) , but you need to return the whole 8k to buy him out as that is the equity in the house, not spent money. I think it should be 6.5k plus 50% of any other rise.

Or if he gets back his 8k deposit and you get back 3k fees leaving 9k profit (4.5k each). That would mean he gets £12,5000 back and you get £7,500 back.

So an offer between 10k and 12.5k would seem fair or equal (assuming 20k equity)

DON’t offer him anything until you have sorted the finance out because until you need to make sure you’re not in negative equity as it’s half his responsibility if you are and you need to make sure you can get the finance on it, on your own.

Then I think the easiest way is to offer him £8k - the deposit he put in, because he won’t be benefitting from that & If you’d bought it on your own you’d have paid the fees anyway.

His part of the mortgage repayment I would treat as rent as you’re now paying all of the deposit & costs of purchasing it. And had you done that initially on your own, you could have had a lodger.

Plus any additional gain he might get if you sold it instead would go on fees really.

It’s going to get really complicated if you start trying to work out a current value because it’s only worth what someone will pay and until it's sold, & completed you can’t know what that would be!

If he won’t accept that and wants valuations, you’ll have to agree on whose valuation you’ll go by. Estate agents (which one), bank valuation? An independent valuer you choose together?

You could also use the difference in the amount of the mortgage so if you got a mortgage for £300,000, but it’s only £290,000 now, you’ve paid off £10,000 his share is £5000 plus he’ll want his £8k deposit back, so £13,000

@catinthehat46 Ok - so legally you own it 50:50 then which is actually in your favour. In theory the sale price should be split equally between you. Not much help in the circumstances though I accept.

It does show up though that couples buying property together especially if un- married should have a proper legal agreement drawn up between them from the outset to cover what will happen if they do split.