what are her rights? advice following relationship split - joint mortgage holders

ComputerUser · 16 February 2009 at 9:32PM

My daughter has just split up from her boyfriend of 5 years. They have been living together for 3.5 - 4 years. They are both joint mortgage holders on their property which they bought 18 months ago. They put down a large deposit to purchase the property - he put down 70% of the deposit, she 30% . They have paid the mortgage and all bills and maintenance / improvements on the house 50/50. The boyfriend now wants to buy her out but does not want to sell the property at this time. due to the current economic climate we are quite certain that the house has de-valued since it was purchased and their mortgage is now more than what they first borrowed. the boyfriend wants the property re-valueing and is then prepared to pay her 30% of the equity (minus the mortgage). This will be significantly less than she originally put into the property. he intends to keep the property and have her name taken off the mortgage and will only re-sell the property once the market has picked up. he hopes to afford the mortgage on his own although i am uncertain if he can afford it. what is the maximum mortgage available to someone on 35k? they presently owe £125k

they have a deed of trust from their solicitor from when they bought the property - this states the percentages and amounts put in by both parties but only discusses what will happen if they split up and sell the property. it does not say what will happen if one wishes to buy the other out. what rights does my daughter have? and if she agrees to him buying her out, will she have to bear the current loss of value to the house even though it is not being sold? Is she entitled to take out the same amount of money she put in?

Also the boyfriend claims that money already put into the house for house alarm, loft insulation, decking etc is now part of the property and despite my daughter paying for half she is not entitled to any money back for these things. is he right?

lastly they both paid 50/50 for a planning application to extend the property. this is due to come through in a few months. if planning permission is granted this will be valid for 3 years. if the boyfriend sells the property within these 3 years surely it will add to the value of the house? and she will have lost out. any thoughts on this?

i'd be grateful for any help
thanks!

Darth_Marty · 16 February 2009 at 9:47PM

Hes pushing it if he wants the whole mortgage on that income, does he have any savings he could use to reduce the mortgage? Its close and id say he would probably find a lender who will allow it even if he has to pay a higher interest rate.

Regarding the money put into the property, well its nigh on impossible for your daughter to get this back and hes right in some respects as the improvements should have increased the value of the property, or at the very least the saleability of it.

Any revaluation will of course reflect todays market and as such yes your daughter will certainly lose out, the planning would likely increase the value of the property but if it lapses it wont mean a thing, i doubt if prices will recover anywhere enough to make the sale of the property viable within 3 years.

Realistically if your daughter wants out then she should accept the valuation (obviously get a few from various agents etc) and if she comes out with any money back shes done well.

That said there are other options like renting the property out for a few years and gambling on prices bouncing back but in reality this is a huge gamble and could well turn out to be a big mistake.

In her shoes id leave the house in his name, be glad to get off the mortgage and bills, take whatever money is on offer and make sure she gets all nice expensive items from the house!!

gauly · 16 February 2009 at 10:41PM

She could presumably force the sale of the house if she wished and the money would be divided according to the legal agreement. So that is the minimum she might want to settle for (ie. the amount she would get if the house was sold - don't forget to subtract off the selling costs). She may want to settle for a little less since it is going to save a lot of hassle.

In the current market I think the offer from her ex is probably reasonable. The house will almost certainly be worth less than they paid for it even with the improvements they have made. Any valuation should take into account value added by the decking, alarm, planning permision etc.

Of course all this may be irrelevant since her ex is going to struggle to get a mortgage big enough to pay her off and cover the current mortgage.

Debt_Free_Chick · 16 February 2009 at 10:53PM

I don't see the solution as being any different to that which would apply if they were selling the property. In effect, they are - they are selling it to him. The process and the end result is the same, for your daughter.

She should end up in the same position as she would if they were selling - no better and no worse.

As for the cost of the improvements (alarm, decking etc) - from your description, these are now part of the fixtures and fittings so their "value" is part of the property valuation. Again, this is the same that would apply if they were selling to a third party.

As the relationship seems to be well and truly over, you all need to view the property as a "business transaction". She may not get all her money back, but that's true of very many investments made recently - you are unlikely to get back today, what it cost you to invest two years ago.

Good luck

barnaby-bear · 16 February 2009 at 11:01PM

ComputerUser wrote: »

and if she agrees to him buying her out, will she have to bear the current loss of value to the house even though it is not being sold? Is she entitled to take out the same amount of money she put in?

Although not being sold he's lumbering himself with having to stay put and the negative equity issue for who knows how long, so it's not like he's ripping her off on that count. It might help psychologically to work out how much she'd have paid in rent if they hadn't bought - lessen the loss.

Richard_Webster · 17 February 2009 at 9:46AM

The logic is that she only gets back the proportion of the present value (taking into account any improvements - "hope" value generated by planning permission etc). Also logically he can deduct the notional cost of selling the proeprty because one day he will sell it and bear the whole cost so the notional net proceeds of sale (after mortgage paid off) should also be less estate agent's fees and legal costs of a sale.

The lender may have altered its lending criteria so that it will only lend 75-80% loan to present value and may only agree for daughter to come off mortgage if the loan amount is substantially reduced - which would seem unlikely from what we have been told.

There is no magic wand to force a settlement and going to court is expensive so the cost of that needs to be considered when considering any offer. The question is whether any better terms that might be achieved by going to court are worth the risks and costs.

pandamonia · 17 February 2009 at 12:05PM

You need to work out what the house is worth and if there is any equity left at all. and if there is then she will either get 30% of the deposit back and 50% of the equity above that. if they are in NE then your daughter needs to take out a loan and pay him half of the negative equity.

He is the one being fair and its you and your daughter who sound like they are not.

Fortheloveofmoney · 17 February 2009 at 1:56PM

My ex and I had a Trust Deed that stated he would get back his deposit and then the rest was 50/50. He chose to stay in the house and buy me out. The agreement was still valid as he was buying my share of the house from me.

It sounds like your daughter won't see the return of her deposit due to negative equity. Probably not what you wanted to hear but what he is offering sounds fair.

zebedy · 17 February 2009 at 2:05PM

Make sure that you get his share of the loan you made to them before they actually sever all financial ties.
Once they finalise all the financial issues between them you may never see or hear from him again and wouldn't be able to get your loan money back!

getmore4less · 17 February 2009 at 3:54PM

She bought a share of an asset so gets a share back,

If all the mortgage costs have been 50:50 then the calc is relativly easy.

she owns 30% of the deposit and 50% of the mortgage at purchase time.

So if the deposit was
10% then that is 45%+3%=48%
50% then that is 25%+15% = 40%

Work out the amount you can sell for after costs and proportion up at the buying %ages then take of 1/2 the mortgage and that what she is due/owes.

The improvments add a complication because if they were paid for 50:50 then that changes the equity split and are going to be very difficult to work out ideally they should have been paid for at the same equity ratio to keep it the same.

They may have agreed something else at the time so that would apply, what does the agreement say?

what are her rights? advice following relationship split - joint mortgage holders

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