Please explain this to me like I'm stupid - what happens if you share a mortgage and then split up?

[Cottoncandyisland]

I'm obviously dimmer than I thought because I have read around online and still don't understand.

What happens if you and your boyfriend buy a home, say 10% deposit. Both then contribute equally to the mortgage. Then you split up say 2 years later...what happens then?

If you sell the house, what money goes where? Because you have barely put a dent in the loan in 2 years...

Basically, will we be left individually bankrupt and paying off a mortgage for the next 30 years? Will I ever be able to get another mortgage?

I plan on getting a mortgage with my boyfriend, but I am really scared about what will happen if god forbid we split up. I am a pessimist at heart unfortunately.

Well... the proceeds from the sale pay the mortgage?

You sell the house and whatever capital there is gets split between you and you go your seperate waya

You sell the property and whatever money is left is split between you.
Failing that , you get the house valued and one of you buys the other one out at 50% of the value.

@user1473878824

But if you have only paid some of the mortgage off, how can any proceeds be 'yours' and therefore yours to use to pay off the mortgage?

I'm sorry, that probably doesn't makes sense.

The money from the sale pays the mortgage off in full. If there is any money left over this will be split between you both, either 50/50 or could be split differently if one of you put in more towards the deposit. If the house has gone down in value then you might find that the money from the sale wouldn’t pay the mortgage off in full, so you would have to consider whether selling was the best option at that point.

Say the house was £250k, mortgage £225k and as you say, you've barely dented it.

Either one of you gives the other £12.5k (half the equity) and stays in the house paying the mortgage alone (depending on whether they earn enough for the bank to allow this) or you sell the house, give the bank their £225k back and take £12.5k each.

@1Morewineplease

Thanks, do you mean that the majority of the sale price pays off the amount on the mortgage that you both will now not pay? And if there is money left, you split it?

Thanks everyone

Your options would be:

1. Sell the house. Pay off the mortgage with the money from the sale, then split anything that’s left.

1. One of you takes over the mortgage as an individual. (You’d need to apply for a new mortgage for the value of the original mortgage. Then you could use this new, solo mortgage to pay off the old, joint mortgage. Then you’d own - or really, be on your way to owning, once the mortgage was paid back - the house by yourself.)

The money you make off the sale (proving house prices go up) goes to paying off the mortgage and you just split any profit

If you split up, one of you could take over the mortgage if you could afford it and could 'buy out' the other's share of the deposit and any equity. If neither can do that or don't want to, you sell the house. Proceeds pay off the mortgage (you hope!) and any excess is split between you.

You have to ideally sell house at the cost of the remaining mortgage or higher in order to pay off the mortgage.

@trilbydoll

That makes some sense, thank you :)

You sell the house, ideally for more than the value of the loan left, pay off the loan and divide up any profit made

[quote Cottoncandyisland]@user1473878824

But if you have only paid some of the mortgage off, how can any proceeds be 'yours' and therefore yours to use to pay off the mortgage?

I'm sorry, that probably doesn't makes sense.[/quote]
So let’s say you borrow £200,000 in the form of a mortgage and buy a house. You then break up 5 years later and sell the house for £210,000. £200,000 of this pays off the mortgage in full, £10,000 gets split between you and your partner.

Obviously it’s not quite those figures as you will have also paid off some of the mortgage in that time, but put simply.

Buy the house for 100k (just to be simple)
Both put in 10% so £20k paid £80k loan
Split up 2 years later and sell house for £110k.
£80k remains on mortgage- pay that off with proceeds of sale leaving you £30k to split between you.

Does that make sense?

If you think your relationship is rocky...don't buy a house together...But definitely don't buy a new build. They almost always drop in value in the first few years and then you can't repay the mortgage with the sale price.

[quote Cottoncandyisland]@user1473878824

But if you have only paid some of the mortgage off, how can any proceeds be 'yours' and therefore yours to use to pay off the mortgage?

I'm sorry, that probably doesn't makes sense.[/quote]
Well it’s not ‘yours’. It belongs to the mortgage company, hence you use it to pay off the mortgage.
So for example you buy a house for 200k. In 2 years you pay off £20k, so mortgage left owing is £180k. You split, and sell the house for £210k. £180k pays off the mortgage, and the additional £30k is split between you.

Unless you’re in negative equity then the sale money goes straight to pay off your mortgage. Do say you bought a 200k house with a 20k deposit and a mortgage of 180k. You sadly split 3yrs later and the house has gone up in value to 220k. You have in that time paid off just 10k. You sell house for asking price. You still owe 170k (180-10). 220 minus 170 to bank leaves you with 50k split 50:50. That’s assuming you opt for a joint mortgage. You can also opt for the other kind (tenants in common or something) where you each own 50% rather than both own 100% together.

It sounds like you don’t really understand what happens when you sell the house. It doesn’t matter that you’ve barely dented the mortgage. Why would you be bankrupt? For example:

1. The bank lends you £225k to buy a house that costs £250k. You pay £25k deposit, £12.5k each. For arguments sake let’s just say that your monthly mortgage payments only cover the interest, and house prices don’t rise.

1. You sell the house a few months later, for £250k. The buyer pays you that money. Of that, you owe the bank £225k that you originally borrowed. There is £25k remaining, which was your deposit, and you split that equally. There may be an early mortgage repayment charge that you’d need to pay out of this.

It’s really not complicated!

Say if your house cost £100,000
Your mortgage is £90,000
You’ve barely paid any of it off but have a bit so you now owe £85,000
You sell the house for £110,000

£85,000 comes out of that money to repay the mortgage and then the £25,000 is split between you

@Myneighboursnorlax Thanks so much! That has made it easier to understand.

@ThatOtherPoster Helpful answer thank you!

@Bigbigknickers That does make sense, thank you so much!

@RandomGrammarPun Something to think about, thanks

Thank you mumsnetters! You have literally helped me understand this in a matter of minutes and I've been googling this for a while haha! Thanks again for everyone who answered. I FINALLY understand :)

OR I have just said something very stupid. One of the two.

@SecondBabyGirl I definitely didn't understand at all, so thank you, this was very useful

You buy a house at £200,000 so presumably you put down a £20,000 deposit between you.

Two years later you split up so sell the house. Perhaps two years down the line the house may have increased in value a little. The house sells for £210,000. Money from the sale goes to the bank to pay off the outstanding mortgage, the amount of that could vary depending on the type of mortgage you had, any deal you signed up to etc. Once the balance of the mortgage has been paid off with the proceeds of the sale, the remainder is split between the two of you. You’d likely get your deposit back plus potentially a little profit. You’re then free to get another mortgage further down the line if you want. You’re certainly not paying the same mortgage for the next thirty years!

Just to add, if you don't put in equal deposits then you can specify what happens to the deposits in event you split up. The agreement is called a deed of trust and a solicitor can draw one up.