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Original poster

Adding onto the mortgage - negative equity

42 replies

Hamandcheesebaguette · 04/07/2018 18:58

Hey, would appreciate some advice please!

Long back story, not relevant to the question. Also it's somewhat hypothetical at the moment but trying to get my ducks in a row so to speak.

DP owns a flat. It is currently being renovated as the plan was to sell within the next few months and buy somewhere together. I rent a flat, where we both are living just now.

However, it is looking increasingly likely that we won't be able to sell the flat as it will be in negative equity.

Figures - flat bought for £97k, £84k left on mortgage, we could potentially be looking at a valuation of around £70k. The market in this area has absolutely plummeted however until we formally get it valued when it's finished this is am informed guess based on other similar properties in the area.

Inconvenient yes, but we thought we would just move there for a while and reassess, adding me onto the mortgage in the process.

However, now I've just had a thought-can I be added on with the flat when it is in negative equity?! Or will we have to pay the difference into the mortgage to do so?which we don't have.

If the above is true... is there any other options?! I am very reluctant to move into a property where I have no rights and no financial claim (related to the back story!!!) But we are both spending thousands a month On different property's and would each be about £1200 better off if we lived together.

Thanks in advance!

OP posts:
FabulousSophie · 04/07/2018 19:32

You would probably need to get a new joint mortgage, and go through the application process. This would presumably need a new mortgage valuation, which would show up the negative equity. Do you have some savings to get the flat out out of negative equity for the new mortgage?

FabulousSophie · 04/07/2018 19:36

Sorry, I just saw that you said you don't have the extra. In that case you could take out an unsecured loan to get the flat out of negative equity.

RiddleyW · 04/07/2018 19:39

Why do you need/want to be added to the mortgage? You can go on the deeds without being on the mortgage

flissfloss65 · 04/07/2018 19:42

Can you buy together and rent out flat?

Original poster
Hamandcheesebaguette · 04/07/2018 19:43

@RiddleyW

Can you? How does that work? He still wants to protect his initial 8k deposit understandably

So does that mean I could pay towards the mortgage still and be entitled to my "share" should the worst happen but not have to go through the application process?

Sounds too good to be true... what is the catch?

OP posts:
FabulousSophie · 04/07/2018 19:44

That's true, you could just go on the deeds, and then just split the current mortgage payments between you. But you would also be liable for your half of the negative equity if you sell the flat, so you would both also need to save up to pay that off.

Original poster
Hamandcheesebaguette · 04/07/2018 19:44

Renting the flat out is a last resort. Financially, it might end up costing us money to do so, albeit only around £50 a month. Plus the stress of it all, but it is a possibility.

OP posts:
FabulousSophie · 04/07/2018 19:46

Negative equity means his £8K deposit no longer exists, I'm afraid, so he cannot protect it.

FabulousSophie · 04/07/2018 19:48

You would both be liable to put in another £7K each if you sold the flat jointly.

Alexalee · 04/07/2018 19:50

Hi
Dont understand what you mean by protect his 8k deposit. If he paid 97 and its worth 70 with and 84k mortgage then his deposit is gone...

43percentburnt · 04/07/2018 19:51

You’d be crazy to do it.

There is no 8k to protect, it’s gone. Therefore if the mortgage lender allowed you to be added into the mortgage (which they may do as it benefits them - 2 of you to chase if the mortgage isnt paid), you would be jointly and severally liable for his negative equity. On top of that if you allowed him to take the first 8k you are, in effect, negative for longer.

If there was a flat on rughtmove would you pay 20k+ more than it’s worth? Because that is what you are doing if you go on his mortgage.

If you have a deposit buy your own 70k flat put down 3.5k minimum and you are in a better position.

The only winner in the first situation is him.

C0untDucku1a · 04/07/2018 19:53

This doesnt sound like a good idea at all. If you split up youd be liable for the debt.

icklekid · 04/07/2018 19:53

Yes was coming to add what others have already said. The value as decreased so there is no deposit any more... I wouldn't want to go on the mortgage of somewhere with negative equity unless it's likely to increase in value in the future...

C0untDucku1a · 04/07/2018 19:55

What do you mean entitled to your share? Your share would be debt. Youd have to pay.

FabulousSophie · 04/07/2018 19:56

Why not just move in and pay him rent?

Original poster
Hamandcheesebaguette · 04/07/2018 19:57

Ah yes. I hadn't thought of it that way.

I don't know much about these things!!

I don't have enough of a deposit just now to buy my own place so that's out.

Such a frustrating situation. I suppose I could still live there but not contribute to the mortgage and pay half the bills and save up on the side as I will be better off either way but that seems unfair

OP posts:
Dickybow321 · 04/07/2018 19:58

I agree with PP. If it is possible you should buy your own £70k flat and then you'd save on the rent you're paying. You can't afford to move in with him and he can't afford to sell his flat. It would be crazy for you to take on his flat and crazy for you to rent indefinitely if you can afford to buy on your own. How long have you been together?

Original poster
Hamandcheesebaguette · 04/07/2018 19:58

From property predictions in the area (we had a talk on it last week at work!) It seems the prices are very unlikely to drop further, and are on the up again just now but won't ever get back up to what they were. Even if the flat coukd break even and we would start again that would be better!

OP posts:
Dickybow321 · 04/07/2018 20:00

Then again if house prices are plummeting flats are the first to take a hit. So maybe a flat isn't the best thing to buy. If you have a feel for house prices in the area then you will know if it is worth buying a flat. Is his a new build ? When I say newbuild I mean the ones they were throwing up circa 2007?

FabulousSophie · 04/07/2018 20:00

Why not buy his flat off him for £70K?

43percentburnt · 04/07/2018 20:00

Move in and pay board and bills. He can use the money he saves to reduce the mortgage, you can use yours to save for a deposit should you split.

If you go on the mortgage and subsequently split and he elects not to pay - you have to. And if he gets the first 8k of equity you will not get a penny until the mortgage is 62k less estate agent and solicitor fees, but you may be paying the mortgage.

Dickybow321 · 04/07/2018 20:01

Cross posts

Original poster
Hamandcheesebaguette · 04/07/2018 20:01

I knew the backstory was going to have to come 😂

Togehter 5 years, I lived in that flat for 3 and a half years with him. The intention was always to add me on (before the market went haywire!) But neither of us ever really pushed for it.

We broke up, I moved out to where I am now, we got back together a month later (and are very happy and in a much better place now!) And now we are trying to work out the next steps to be fair to all.

OP posts:
Eatsleepworkrepeat · 04/07/2018 20:01

Presumably if you move in and pay half the mortgage and bills it will still save you money, so you'll still benefit more than if you were continuing to rent.

Dickybow321 · 04/07/2018 20:02

43's option is something to consider if you don't want to buy elsewhere. Definitely do not take on a negative equity property whatever you do!