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    • GleamingParsnip
    • By GleamingParsnip 10th Nov 17, 8:27 PM
    • 5Posts
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    GleamingParsnip
    Tenants in common separating
    • #1
    • 10th Nov 17, 8:27 PM
    Tenants in common separating 10th Nov 17 at 8:27 PM
    Good evening,

    About 2.5 years ago, my girlfriend Kim and I bought a house together. We're tenants in common (50% each), on a 5-year fixed term (20 year total) mortgage. Things aren't going well, and there's a very high chance of us splitting up. We aren't married and there are no children to consider, just the two of us. Excuse me if I sound cold or detached, I'm just trying to consider some options of what we can do with the house.

    I've done some research online, and the most common thing to do is for the house to be sold very quickly:
    a. The house is sold on the open market. The mortgage is paid off and Kim and I split the difference equally and move on.
    b. One tenant-in-common sells their share to the other. In our case Kim sells me her share, the house is remortgaged and she takes 50% of the value and I stay in the house with the whole mortgage.

    What I'd like to find out about is what could happen if Kim moves out and I take over the current mortgage until the end of its term, then buy her out at that stage (Summer 2020). Is there a special name for that kind of arrangement because I am finding it hard to google?
Page 1
    • Malc00
    • By Malc00 10th Nov 17, 9:39 PM
    • 12 Posts
    • 3 Thanks
    Malc00
    • #2
    • 10th Nov 17, 9:39 PM
    • #2
    • 10th Nov 17, 9:39 PM
    Very sorry to hear your situation but I understand you want to know where you stand.

    Who is your mortgage with at the moment?

    The second option is called a transfer of equity. Where the joint name is removed from the mortgage and deed and placed solely in your name. Depending on the lender's criteria and your affordability you can explore borrowing funds against the home in order to pay off her interest.

    Out of curiosity - why would you not want to buy her out sooner?
    • enthusiasticsaver
    • By enthusiasticsaver 10th Nov 17, 9:43 PM
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    enthusiasticsaver
    • #3
    • 10th Nov 17, 9:43 PM
    • #3
    • 10th Nov 17, 9:43 PM
    Did you draw up a declaration of trust when buying the property stating what should happen if you separated?

    You would need to speak to your lender as to whether you are able to take the mortgage out on your own as this would depend on your income. Your ex would just get 50% of the equity so it depends on how much the mortgage is and the value of the property.
    5 weeks to go until early retirement in December . Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • getmore4less
    • By getmore4less 11th Nov 17, 6:49 AM
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    getmore4less
    • #4
    • 11th Nov 17, 6:49 AM
    • #4
    • 11th Nov 17, 6:49 AM
    .

    What I'd like to find out about is what could happen if Kim moves out and I take over the current mortgage until the end of its term, then buy her out at that stage (Summer 2020). Is there a special name for that kind of arrangement because I am finding it hard to google?
    Originally posted by GleamingParsnip

    There is no name for it.

    There are various ways to do it.

    They continue to own 50%, you rent their 1/2 of them and that money pays their share of the mortgage.

    you agree the equity% at point of moving out eg ((Value-mortgage)/2) and that stays fixed till you buy out and you pay all the mortgage
    ie. you get more of the future uplift in value.

    You do the buyout but don't have the cash so it is a debt(fixes the cash value) and you agree a rate of interest till you can raise the cash.

    If she moves out there are tax implications, income and CGT
    If you get a get a lodger that introduces new ones.
    • GleamingParsnip
    • By GleamingParsnip 11th Nov 17, 7:26 AM
    • 5 Posts
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    GleamingParsnip
    • #5
    • 11th Nov 17, 7:26 AM
    • #5
    • 11th Nov 17, 7:26 AM
    Current mortgage provider is Halifax.

    My concern about buying her out immediately is that I may not be able to afford it right away. We have a relatively low loan-to-value ratio - it was 35% on purchase. (60k mortgage vs 170k value). My assumption here is that "buying her out" means increasing the mortgage by 50% of the value of the house (85k). If I remortgage and increase it to buy Kim's share, that will mean the new mortgage will increase to 135k, more than double the old one - 85% of the value.

    That doesn't take into account two things - the amount of original mortgage already repaid and any change in the value of the house from the initial valuation. I've had a look on Rightmove and Zoopla and it's incredibly hard to judge the current selling price of similar houses due to the size of the village. There simply aren't enough similar properties on the market for a quick and easy comparison.
    • Tom99
    • By Tom99 11th Nov 17, 8:07 AM
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    Tom99
    • #6
    • 11th Nov 17, 8:07 AM
    • #6
    • 11th Nov 17, 8:07 AM
    Based on your figure you need to pay you ex (170-60)/2=55 so your remortgage will be for 115 not 135.

    That will need adjusting for price increase and mortgage repayment to date.
    • getmore4less
    • By getmore4less 11th Nov 17, 8:13 AM
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    getmore4less
    • #7
    • 11th Nov 17, 8:13 AM
    • #7
    • 11th Nov 17, 8:13 AM
    What's the current value and outstanding mortgage?
    • GleamingParsnip
    • By GleamingParsnip 11th Nov 17, 11:55 AM
    • 5 Posts
    • 1 Thanks
    GleamingParsnip
    • #8
    • 11th Nov 17, 11:55 AM
    • #8
    • 11th Nov 17, 11:55 AM
    Based on your figure you need to pay you ex (170-60)/2=55 so your remortgage will be for 115 not 135.
    Thanks. Oh, I see, because it's her half of the equity that I'd need to add to the mortgage, not half the total value.

    The current balance on the mortgage account is just over 54,000. That's not considering any fees for coming out of the fixed term early.
    • enthusiasticsaver
    • By enthusiasticsaver 11th Nov 17, 1:24 PM
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    enthusiasticsaver
    • #9
    • 11th Nov 17, 1:24 PM
    • #9
    • 11th Nov 17, 1:24 PM
    I would have thought Kim would be entitled to her half of the deposit and half the equity with maybe deductions if she has not been paying the mortgage since your split. So her share of the deposit would be 55k plus half the equity which is the value of the house less 54k.
    5 weeks to go until early retirement in December . Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • GleamingParsnip
    • By GleamingParsnip 11th Nov 17, 2:12 PM
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    • 1 Thanks
    GleamingParsnip
    I would have thought Kim would be entitled to her half of the deposit and half the equity with maybe deductions if she has not been paying the mortgage since your split. So her share of the deposit would be 55k plus half the equity which is the value of the house less 54k.
    I agree, I think it was just a poor use of terminology on my part when I said equity. I wasn't specifically including reinstating the original deposits, but combined them with the value after deducting the mortgage.

    So if the value is 170k less remaining mortgage 54k = 116k.

    Which shows the 6 more than the original deposits as the change in equity. So Kim's share is either 55k + 6k/2 or 116k 2. Either way that's 58k, plus half of whatever the change in market price has been since the original valuation was done in 2015, before we bought it.

    And so in order to buy her out, that's the amount that I'd need to increase the mortgage by?
    • getmore4less
    • By getmore4less 11th Nov 17, 3:17 PM
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    getmore4less
    the simple calculation is

    1/2 the current value less 1/2 the outstanding mortgage.
    • GleamingParsnip
    • By GleamingParsnip 11th Nov 17, 4:49 PM
    • 5 Posts
    • 1 Thanks
    GleamingParsnip
    Talking about restoring the original deposits, I realised there is a complication. 170k was the original valuation, and we do own 50% each, but the deposits were uneven. 40k of the deposit was cash, which I supplied.

    The previous owner of the house was Kristen, Kim's mum. She sold the house to us at 100k - the difference being a gift to Kim.
    • getmore4less
    • By getmore4less 11th Nov 17, 7:24 PM
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    getmore4less
    Talk about drip feeding.

    What was the agreement when you bought?

    If you put those deposits down and paid mortgage 50:50 proper equitable shares would not be 50:50.
    • AnotherJoe
    • By AnotherJoe 11th Nov 17, 8:03 PM
    • 7,562 Posts
    • 8,166 Thanks
    AnotherJoe
    What I'd like to find out about is what could happen if Kim moves out and I take over the current mortgage until the end of its term, then buy her out at that stage (Summer 2020). Is there a special name for that kind of arrangement because I am finding it hard to google?
    Originally posted by GleamingParsnip
    Yes, its called a big financial and legal mess when the two peopel quarrel over who owns what and is due what now that one persons been paying the mortage, the other rent elsewhere, and one or both change their minds about what was agreed.

    Sell to a third party or one of you two and get it done quickly and cleanly.
    • Tom99
    • By Tom99 12th Nov 17, 1:15 AM
    • 545 Posts
    • 320 Thanks
    Tom99
    Talking about restoring the original deposits, I realised there is a complication. 170k was the original valuation, and we do own 50% each, but the deposits were uneven. 40k of the deposit was cash, which I supplied.

    The previous owner of the house was Kristen, Kim's mum. She sold the house to us at 100k - the difference being a gift to Kim.
    Originally posted by GleamingParsnip
    So if we say house has gone up from 170 to 200:-
    Amount her deposit bought 70/170*200 = 82,352
    Amount your deposit bought 40/170*200 = 47,058
    After taking above into account, you split 50/50 after mortgage so you each get:
    (200,000-82,352-47,058-54000)=16,590/2=8295
    So you owe Kim 82,352+8295=90647
    Your equity is 47058+8295=55353
    Who paid the fees on top of the 170 purchase price because that also needs to be factored in?
    • getmore4less
    • By getmore4less 12th Nov 17, 8:47 AM
    • 30,214 Posts
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    getmore4less
    in the absence of an agreement/intent and the current value here are some typical examples based on the current information.

    value now & then 170k
    deposits her 70k, you 40k, mortgage 60k(paid 50:50) outstanding 54k

    1. Proper equity split
    split is 70+30:40+30 100:70 58.82% 41.18%

    proceeds are that % value less 1/2 the mortgage left(any uplift in value at 58.82% 41.18% ratio.

    her 73k you 43k to buy out you need a mortgage of 127k + 58.82% of any uplift in value

    2. Get the deposits back split 50:50

    After deposit there is 60k left - mortgage 6k 3k each + 50% of any uplift in value

    you get back

    Her 73k you 43k to buy out you need a mortgage of 127k + 50% of any uplift in value

    3. own 50:50 no deposits back

    simple 50% current value - 50% mortgage

    That's 57k each to buy out you need a mortgage of 113k + 50% of any uplift in value



    (as Tom99 says feeds for purchase need to be include in the purchase price/deposits for 1&2)
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