Buying bankrupt ex partners mortgage share. Any advice please?

Treadway1

Hi All,

I originally posted this in the mortgage forum but it was suggested it may be better off here.

Id really like some advice on a situation thats just arisen. Its quite complicated, but Ill try and give you all the abridged version.

I bought my current property in August 2004 with my then Fiancee, however, shortly after buying it (Around 6-8 months), our relationship ended and she moved out leaving me to continue paying the mortgage. I just managed to afford this by myself, but because I had the extra to pay alone, I wasnt at that time, or any time since, able to afford to buy her out of the mortgage, so it was left with her as joint mortgage holder.

Fast forward to a month ago and I received notification that my ex has gone bankrupt, by way of a letter from an insolvency agency (I havent spoken to my ex since she moved out) and that her half of the mortgage now belonged to the official receivers. I was told that its possible for me to buy that half of the mortgage back from the receivers by paying them half of any equity in the house, and in the case of negative equity, I would only have to pay them a £1 plus costs of £211. I did my sums and worked out that my house was around £1000 in negative equity due to the current housing market slump, which was perfect for me as I would then only have to pay a pound to buy the mortgage share, however when I went to see my mortgage lender, I assumed that it would be a simple case of removing her name from the agreement, but was told by the mortgage advisor that it would need a new mortgage application by just me. Subsequently, I was refused for a mortgage on my own, despite having paid my current one alone for the last 4 and a bit years!!!!

My question is then, am I able to go ahead and send off the details of the negative equity to the receivers and buy the other half of the property back from them, yet leave my ex's name on the mortgage agreement until I am able to succesfully apply for a mortgage on my own? or would I need to be accepted for a sole ownership mortgage before or at the same time as buying the other half of the property from the receivers?

Apologies if this is confusing, but if its any consolation, its been no easier to understand for me...lol.

Any advice would be greatly appreciated.

Peter

peachyprice

Hi Peter,
There seems to be some confusion as to what the OR is offering you.

You have been given the chance to buy the Beneficial Interest from the OR, this is something entirely different to the mortgage. Basically as you are in neg equity you are buying the future rights to any equity once (if) the market improves. So you pay your £1 + £211 now and in 10 years time there is £10k equity, if you then decide to sell 100% of the £10k is your and none of it goes to your ex.

Buying the BI has no effect on the mortgage or ownership of the house, this is something else entirely, as you are finding. out.

Once you have bought the BI it's highly likely your ex will be happy to have her name removed from the deeds as there will no longer be any benefit to her being on them. Not sure how this would work, but I'm sure someone on the house forum could help you out with that one.

As for the mortgage, you can continue to pay it even though her name is on it. As she is BR if you were to stop paying the mortgage she would not be liable for any shortfall or costs if the house were repossessed, and as such is not at risk by her name staying on it.

HTH

Treadway1

Fantastic. Thats just what I wanted (and hoped) to hear. Many thanks for this PP.

One last minor question though, if I were to buy back the interest, would I need to tell the mortgage company of this. I know Im asking an irrelevant question as I would tell them anyway (Unless anyone would advise not to for any reason), just wondered if I was legally obliged to tell them I owned 100% interest in the property.

Thanks again.

peachyprice

As far as I know you're not obliged to tell them as it would only be an issue of the house were sold.

Treadway1

Thats brilliant. Thanks again for the advice.