A money one - who is being unreasonable?

[AnnaQuayInTheUk]

A family member, let's call him Josh, and his girlfriend, Sophie, have been together for 5 years. Three years ago they bought a house together. Josh had inherited some money so put down the deposit of £30k, Sophie didn't have any money so didn't put down anything.

The house They loved was £210k so they used Josh's inheritance as a deposit and took out a joint mortgage of £180k. All good.

However, they have now split up. They've had 3 house valuations, and have realised that the house has gone down in value. On the advice of the EA, they are putting it on the market at £189k but have agreed that they will accept £180k for a quick sale.

The issue is this. Assuming the worst case scenario that the house sells for £180k, should Josh accept he's lost his inheritance and suck it up, or should Sophie pay Josh £15k as her "share" of the loss?

AIBU - Josh should suck it up
YANBU - Sophie should pay Josh £15k

They are both aware that the house might not sell at all!

@AnnaQuayInTheUk can you answer the questions asked by PPs?

• Have they paid anything off the principal? Surely if the mortgage was for 180K and the value is 189k there should be at least 9k + whatever they have paid down over the last 3 years.
• Can Josh afford to take over the mortgage alone?

If he can afford it himself, then I’d suggest he pay her out proportionately to how much they’ve paid off the principal. E.g. if she’s been paying 40% of the mortgage and they’ve paid 3k off the principal, she gets 1200.

But Sophie doesn't have to give Josh any money.

If they were joint tenants they're both equally entitled to any proceeds from a sale - in this case that's nothing.

If they were tenants in common then Josh is entitled to more of the proceeds - but that's still nothing.

Perhaps morally it would be nice for Sophie to produce 30k from nowhere and hand it over, but that has no legal binding and she likely doesn't have 30k to hand over as a nice thing to do!

If they currently owe 180k on the mortgage and the house is valued at 180k the only person getting any money is the mortgage provider.

If their original mortgage was 180k and the house is valued at 180k then it's possible they may have paid off a few grand - maybe as little as less than 0k total. That will be eaten by the estate agent and solicitor fees. If they paid of 10k they'll be lucky to have 5k of that at the end of this. If they are joint tenants then that means they'll both walk away with 2.5k.

I personally only paid off £4k on my mortgage last year. We don't know how long they've lived in this house. They may have only paid off a similar amount.

Even if Josh had protected the deposit, the money is gone and therefore Sophie would still walk away owing nothing. It isn’t possible to loan money to secure a mortgage and people saying she owes him money, legally she really doesn’t. If this is your family member and you are able to help him out, I would try to do so but be mindful of protecting yourself as well.

Edit - of course any profit should morally go to Josh. And it would be nice if Sophie could cover the legal fees seeing as she’s insisting on the sale and won’t have lost a bean.

I agree with this… Josh needs to hang on to the house to protect his assets. Can you act as guarantor if he can’t take the whole mortgage on himself?

Josh is being unreasonable. They legally each own 50% of the house and the proceeds (or losses) are split equally. Josh is deluding himself if he thinks Sophie is going to hand over thousands of pounds at this stage. Lesson learned, move on.

If affordable, Josh might as well stay in the house (removing Sophie’s name) rather than incur estate agent fees etc. Perhaps he could rent out a spare room to help with costs.

If Josh wants to stay in the house surely the easiest thing to do is for Sophie to leave with nothing- no equity but also no debt. Best for both I think as Josh also avoids z big expensive upheaval.

Morally no he shouldn’t just lose his inheritance, Sophie should pay him 15k. Legally, Sophie hasn’t got a leg to stand on. Josh should have insisted on a tenants in common mortgage to ring fence the deposit. They could have had a different split than 50-50 to compensate for this. My ex and I did that, as he also paid 30k deposit, and I didn’t pay any. When we split I could have claimed 40% of the equity, and ex DP paid 60k off the mortgage that he saved whilst I paid for everything for the kids and the majority of the food shop. But I didn’t claim for any of the deposit or 60k.

There probably won’t be anything to split once they have paid legal fee’s estate agents etc the house has a mortgage of £180,000 that they have only been paying 3 years they will have hardly paid anything off it think people are assuming the house is paid for and they will be splitting £180,000 when in reality it’s probably going to be around ten grand so I’d say personal who put deposit down should get anything that’s left after the sale

Thanks everyone.

They've not paid much of the mortgage off, it's only been 3 years. So there's no "buying out".

Sophie wants to be off the mortgage so she can get another mortgage with her new partner. Josh doesn't want to agree to this until the deposit money is sorted out. He's hopeful that he might be able to hang on to the house but worried about paying the mortgage by himself - assuming the mortgage company will even agree to that.

I'm trying to give him advice but am very conscious that there is a difference between what is morally right and what is legally right. If it goes down a legal route, that could cost £££. I'm also conscious that I'm not neutral in this as I feel Josh has been treated very badly. Hence asking for opinions on here.

I don’t think there’s any point going down a legal route as he wouldn’t be entitled to anything and he’d just waste money. Moral entitlement only here I’m afraid.

OP Josh can simply take over the mortgage in his sole name- he just needs to contact an adviser and go through the process of legally “buying” her out. Unless he can’t get a mortgage in his sole name.

There is no legal route for him to get his money back here. He didn’t legally protect the deposit which means it stopped being “his” that day and it’s gone now anyway so even if he ring-fenced it, £0 is £0.

I agree with this poster. It’s hard for him to swallow, but that was the risk. To avoid throwing more money away legally, I’d suggest they get her removed from the mortgage if they can and he keeps it on his own. Clean break. No money changing hands.

He then has the chance over time to get back in positive equity and eventually see his investment pay off.

If Sophie has the cash then morally yes she should offer to repay 50% of the deposit.

On the flip side Josh agreed to pay the deposit at the time and if there was no agreed repayment discussed then maybe it should just be let go and put down to experience.

To add, ring fencing it would just have meant that he would get his £30k back first of any equity that was there to be split, so here where there is no equity he would still have got £0 anyway.

Ring fencing it doesn’t protect you from a bad investment which this was, the money is gone.

I mean, morally he should get more of the money (or less of the debt?) but surely this is a moot point until he gets legal advice. He is well within his rights to ask for that but surely it depends on the bottom line of the law.

There is no legal route, the deposit wasn’t ring fenced and if it wasn’t in negative equity arguably Kate could argue for a portion to pay her out
And however badly she has treated him the fact the deposit has gone and they are moving is the market

removing her from the mortgage if he can afford it is the way forward any gains from there would be his and his alone

Josh should get back the £30k regardless since Sophie would not have been able to purchase the house at all and would have been renting without it. Even then, the £30k is generous to her as will not factor in inflation.

Then assuming sale price of £150k - half each, assuming both paying the same mortgage.

Astonished that Sophie would only be expecting to pay £15k and splitting the £30k deposit, given the circumstances.

The idea that Josh should suck it up and lose the money left to him by a relative is totally shocking imo.

Yes it's sad when a relationship ends and don't know the circumstances or other details

And yes - re nature of the split - we don't have that info (unless it appears later in the thread) but in terms of what's right financially, I say Josh gets his deposit back, and everything else is split 50-50, assuming 50-50 payments. And that whatever else has happened to cause the split is separate to anything financial.

Sounds like Sophie needs to rethink her decision making skills. Jumping into buying with a new partner? Is she a bit thick?

Actually yes I agree with this - this is the most fair. £26k deposit to Josh, split the rest

Josh should get his full £30k back. If he had invested that money elsewhere it would have increased in value. They wouldn’t have been able to buy the house without it.

There is no equity, the 30k is gone. He made a bad investment- there’s no protection for that and that’s the case with any investment, you can make money, you can also lose money.

If there's no equity, there's nothing to split. No chance of Sophie paying Josh a bean when she wants to buy a house with her new DP.

The best outcome for Josh would be to get Sophie's name off the mortgage, then he should live there himself and rent out however many spare bedrooms he has. In 5 years time he'll be laughing as tenants would have paid a decent chunk of his mortgage off.

Yes, clearly there’s no equity. But Sophie would walk away in the same position she started from (ie with nothing) and Josh would walk away with £30k less than he started with.
That’s not fair, so he should get some of his deposit back (albeit less than £30k as his investment decreased in value). If the property value had increased as is usually the case, Sophie would rightly have expected a share of the profit, so in the same vein she should pay Josh a share of his loss (the % of the decline in value).

@TerrorAustralis I don't know exactly how much of the capital has been paid off, but I think very little as it's only been 3 years and the first few years of mortgage payments are mostly interest aren't they?

The house may sell for more of course, but none of the agents were optimistic about that. Sophie will be pushing for a quick sale as she wants to buy with her new partner

Josh is exploring whether he can have the mortgage in his name only. If so, that would be the best option. Hopefully by the time he then wants to sell the house will have regained value.