Buying ex out of house - short fall?

[Nearlyalldone]

I’d appreciate your advice!

I’m planning to remortgage with my existing mortgage lender in order to pay my ex out of the family home. I need to pay my ex over £100,000 for his share of the equity.

Just been talking to a mortgage advisor and I now have a decision in principle. The extra amount I could borrow on top of the existing mortgage amount should be hopefully be enough to buy out my ex with my estimated house price value (based on sale prices of the same house style as ours on our street - no houses have been put up for sale on our street since 2018 - I’ve added £50,000 on top of the most recent 2018 sale price for my estimate).

However, the house valuation by the mortgage lender hasn’t been done yet and there’s a possibility that the house could potentially be valued higher than my estimate. The family house is in a highly sought after property hotspot and prices have skyrocketed in the wider neighbourhood. However, the cost of living crisis is slowing things down and houses are taking much longer to sell these days, in addition, the asking prices frequently get revised down. It’s hard for me to estimate the value of my house because of this.

What do I do if the amount that I can borrow is not enough to pay out my ex? I doubt that the outstanding amount (if there is one) would be massive - I’m guessing it would be a max of £15,000. Would it be reasonable for me to ask my ex to forgo this amount for a quick equity transfer (selling the house would be very time-consuming and costly with estate agent etc fees in comparison). Or, could I ask him if I could pay back the £15,000 in instalments over the next few years?

Thanks in advance for your thoughts.

If its just a mortage valuation, all they do is check it is worth what they are lendin, its not like a property valuation

If it’s like my last remortgage, my mortgage company just checked sold prices on zoopla then decided my house was worth about £200k less than it actually is. They didn’t take into account all the extending we’d done. I wouldn’t worry too much.

My consent order was based on the estate agent valuations. Surely mortgage lenders would only tell you if it was less and they don't want to lend the Lindy

*money

When I was in this situation I got three estate agents to value the house. I'd explained the situation and they gave me reasonable, non-inflated valuations in writing. The value I went with was the middle one. I kept everything to back it up if ex questioned it (he didn't).

In the end, I couldn't borrow enough to buy him out completely. I paid him as much as I could and then the remainder was put as a charge on the house. This was sorted out by my solicitor at the same time as the rest of the divorce finances. I have to pay him back either when our younger child turns 18, or when I sell the house, whichever is the sooner.

I advise that if you go down this route then to make it when your youngest child leaves home, otherwise you'll be looking at downsizing in the middle of an exam year.

Good luck! I hope it goes well and you can borrow the money you need.

Thanks everyone! As we’re not selling the house, I thought that the mortgage valuation could form the basis for the property valuation. I was thinking that this valuation would be more realistic (ie affordable for me!) than an estate agent’s valuation. As I mentioned in my OP - the house prices in my neighbourhood went insane before the cost of living crisis kicked in. Estate agents are still initially marketing houses at the high peak level… but the asking prices are dropped pretty quickly these days due to little interest. Even then, the houses sit on the markets for over a month before getting offers (due to the limited availability of houses that come up for sale in my area, they used to get snapped up within a week and there were frequent bidding wars).

@MeghanThyStallion - this is a really helpful suggestion to say to my ex that I’ll pay him the outstanding amount (if there is one) when our youngest child has completed their full-time education. Thank you!

Obviously, I don't know if your legal advisor has told you this; when I was in your situation my solicitor advised me that I should calculate the cost of selling the house, estate agents, legal and moving, then deduct half of those costs from the equity my ex was entitled to.

Thank you for this - it might help!

It’s faur that your ex gets a share based on its fair valuation not a low ball one
are you married? In which case have you agreed an overall split of assets?

The equity in the house for the purpose of divorce should be:

house value - mortgage - early repayment charges (if any) - estate agent fee (inc vat) - conveyancer (inc vat) = equity to be shared.

The trickiest one to get right is obviously the house value. You either need to agree a price you’re both happy with, pay a surveyor or do what we did, which is get 3 x estate agents valuations each and then go with the average of those - in the end they were broadly the same.

The mortgage valuation is just so that the bank can’t make sure they’re not handing over more money than what the property is really worth. You’re at risk of if being under-valued but I’ve never heard of a mortgage valuation coming in higher than the purchase price.

Have you spoke to your bank recently about a full application? I only ask because I got turned down by my bank just yesterday for additional borrowing to buy STBEXH out of the house - this was after previous meetings I had with them in November and December where they said all was ok and on track for what I wanted to borrow.

Now it's a flat no because apparently lending criteria is being tightened up....also and this is particularly relevant to you....they didn't like that the remortgage wouldn't buy him out completely and conclude the divorce settlement. They wanted a letter in writing signed by STBEXH stating that he would be removed from the mortgage and have no further claim over the house and I would have to prove how I would make up the shortfall between what I was giving him as the remortgage equity release and what we have agreed as the divorce settlement.

Obviously STBEXH solicitor said no way sign that as he's advised that a charge should be noted on the land registry against the house that STBEXH still has an interest in the house until the final balance of the divorce settlement was paid but all that's moot anyway now as the bank have turned down additional borrowing even though our current LTV is 50% so plenty of equity in the house to make it low risk

I would expect your ex to ask for an RICS Red Book independent valuation rather than go on a valuation for remortgaging.