Buy out or be bought out?

silvercar

I agree with pinkshoes figures, but that all means that you are buying a depreciating asset for more than it is worth. You may as well write her a cheque from your inheritance. What would happen if you had no inheritance? At a guess you would have no option but to sell up.

As for what a property is really worth? In this market it is difficult. If you price realistically and then still don't get an offer you could end up reducing the price again and following the market down.

Use houseprices.com or nethouseprices.co.uk to see what similar have sold for. Try zoopla which attempts to put current values on houses that have been sold.

tripleblack

pinkshoes wrote: »

If the mortgage is £99k and the house is "worth" £170k, then she'd be wanting around £35k, which is half the equity?

If you buy her out, then that leaves £134k mortgage. How much inheritance money do you have? Is it enough so that you could actually afford to take the mortgage on your own?

i.e. if you have £34k from the inheritance, you'd still need a £100k mortgage, and given that banks are only lending 3x salary, you'd need a yearly salary of £33k to be able to buy her out!!!

If she's hankering for £180k, then tell her she can buy you out at that valuation!! I think she's taking you for a ride!

Hi pinkshoes i have £115k inheritance so enough to buy her out and pay a chunk off the mortgage to manage ok. I really genuinelly think she is TRYING to be fair, in her head shes thinking 'well i helped to support you whilst you got yourself organised and now i have to take a hit because of the house price decrease in that time'

So am i right in thinking she has no legal right to reclaim the money she supported me with paying bills mortgage etc even when she wasn't living there? And also no legal right to more equity due to her higher earnings. I think Silvercar has already answered this but just wanted to be sure.

Many thanks

TB

silvercar

She definitely has no legal right because of higher earnings. I doubt she has any legal right for time when she supported you. I think there is some emotional / moral blackmail going on here. Whatever went on to cause a split doesn't alter the fact that you have a joint liability for a joint mortgage.

huntersc

tripleblack wrote: »

Hi folks,

Ok guys you will have to bare with me as i am not very wise to this sort of thing, i do plan on seeing an IFA very soon but would just like some opinions possibly beforehand.

Sadly me and my g/f recently separated and i now have the dilemma of whether to stay in the house and buy her out or to let her buy me out. She would prefer for me to buy her out and her live elsewhere as she has stronger emotional ties to the place whereas i would be more than happy to stay here.

Selling up is not really an option as g/f would like to buy new a new house sooner rather than later, needs a deposit as has no other capital and is not prepared to wait for a buyer in this market. Even though she doesn't want to live in the house she realises however it would make more financial sense to buy me out if i decide i do not want to buy her out. Hope that makes sense?

Mortgage is £99k house was valued at £175 just 4 months ago, prob £170 now.

I have some inheritance i can afford to buy her out with and possibly pay off a bit of the mortgage to make things that bit more comfortable. As i said i'm useless with finances (but getting better due to this site) but i'm thinking if i buy her out, the house could well be worth £140k in couple of years.

I'm guessing if i planned on staying in the house forever then it wouldn't really be an issue as i could just ride it out right? But might it be wise to let her buy me out and rent somewhere until the market bottoms out then buy a bargain property before things start picking up again?

Can't see myself in rented accommodation but if it saves me £ks then it's something i need to consider.

I'm sure you guys may need some more facts and figures so please ask away.

Oh and i'm also not feeling too safe in my job which could make a big difference to the decision...life is taking a nasty turn lately

Regards,
TB

First, it always amuses me when people ask me to 'bare' with them Always causes me a little chuckle.

Right. The decision on who buys out who depends very much on the price agreed.

If your GF agrees that the price is £170k then let her buy you out, under no circumstances buy her out.

The only time for you to buy her out is when the price is at a level where you are future proofed against further falls and to compensate you for taking on an asset in a falling market.

That last point is important. Buying an asset in a falling market is a bad idea. As such you need to make sure you're protected.

Personally if the house was valued at £170k last quarter then I'd agree to buy out at a value of about £110k. I wouldn't go higher.

pinkshoes

tripleblack wrote: »

So am i right in thinking she has no legal right to reclaim the money she supported me with paying bills mortgage etc even when she wasn't living there? And also no legal right to more equity due to her higher earnings. I think Silvercar has already answered this but just wanted to be sure.

You need to get the idea of her "supporting" you out of your head.

What she was actually doing was protecting her own credit rating, as if you had defaulted on the mortgage paying it on your own, then it would have damaged her credit rating rating too, and ruined her chances of getting a good mortgage deal in the future!!

Personally I think you should put it on the market to sell, then see if any offers come in. If people offer say £140k, then offer to buy her out at that price.

Debt_Free_Chick

tripleblack wrote: »

So am i right in thinking she has no legal right to reclaim the money she supported me with paying bills mortgage etc even when she wasn't living there?

No you're not. But it's nothing to do with "supporting" you. Effectively, you were occupying her share of the property and she is entitled to rent. You were occupying your share and renting her share from her. This principle is set out in the Trusts of Land and Appointment of Trustees Act 1996 and supported by a few court cases. (When a property is owned jointly, a "trust" is formed so that you both jointly hold the property for the benefit of the other.)

So - in a nutshell - she contributed towards the bills, but you owe her rent for the period when you occupied the property, alone.

I suggest you do nothing about this but just bear it in mind. If she wants to play hardball, then her claim would be for half the equity PLUS rent for your period of occupation. So if you settle on half the equity only, you will have got a good deal.

silvercar

Debt_Free_Chick wrote: »

No you're not. But it's nothing to do with "supporting" you. Effectively, you were occupying her share of the property and she is entitled to rent. You were occupying your share and renting her share from her. This principle is set out in the Trusts of Land and Appointment of Trustees Act 1996 and supported by a few court cases. (When a property is owned jointly, a "trust" is formed so that you both jointly hold the property for the benefit of the other.)

So - in a nutshell - she contributed towards the bills, but you owe her rent for the period when you occupied the property, alone.

I suggest you do nothing about this but just bear it in mind. If she wants to play hardball, then her claim would be for half the equity PLUS rent for your period of occupation. So if you settle on half the equity only, you will have got a good deal.

Does this still apply if voluntarily moved out?

If she agreed to continue paying bills while both parties sorted themselves out?

Friends split up and my friend got a court order to say that existing financial arrangements should continue until financial settlement is reached, so one party had to carry on paying the mortgage and utilities without living in the property.

lonestar1

If you do buy her out make sure you deduct half the Estate Agents Fee that you would have had to pay had you put the house on the open market

Debt_Free_Chick

silvercar wrote: »

Does this still apply if voluntarily moved out?

If she agreed to continue paying bills while both parties sorted themselves out?

On the face of it, yes - unless they explicity came to some other arrangement. And it's not always the case that "half the bills" is equal to half the rent. The strict calculation is that the person occupying the property should pay half the market-rate of rent to the other person. That amount could be less than half the mortgage - or more than half the mortgage.

Friends split up and my friend got a court order to say that existing financial arrangements should continue until financial settlement is reached, so one party had to carry on paying the mortgage and utilities without living in the property.

Were they married - if so then different arrangements apply that would probably override the ToLAoT Act. Or perhaps there were other financial factors to take into account As is the case with the law, you need to look at all the circumstances and not one aspect of it.

silvercar

Seems unfair.

X and Y set up home together, X earns three times Y but in the relationship they pool finances. X and Y split up, X moves out.

Now Y is liable to pay half the going rate of rent to X, even though Y would never have got into the situation of renting such an unaffordable place on Y's salary alone.