Relationship Split - House Equity Dispute

laddercoin

Hi Guys,

I'm presently in an unfortunate position where I’m splitting up with my partner whom I share a mortgage with. The mortgage is for a 200k house bought in August 2007, it is 50/50 split between us and it is a fixed, 100%, interest only. The mortgage is fixed until August 2010.

The house has been valued three times this week, once at 210k (yes more than we paid in 2007??????), once at 180k and 195k. So we are roughly in 10k negative equity.

The preferred option here is for one of us to carry living in the house until the mortgage term runs out and therefore not incur any penalties for getting out of the mortgage deal (£6000). This is hopefully done by one of us taking full control of the mortgage and removing the other persons name from the contract.

My question is, bearing in mind the house is in negative equity of 10k, would the person who is being removed from the mortgage contract have to pay out half of the current 10k Negative Equity, because they are leaving the other person in a worse position than when the house was bought?

Hopefully this all makes sense, I’d be grateful if someone could give some advice here.

opinions4u

My question is, bearing in mind the house is in negative equity of 10k, would the person who is being removed from the mortgage contract have to pay out half of the current 10k Negative Equity, because they are leaving the other person in a worse position than when the house was bought?

It's a logical view, but I would strongly suggest that you use solicitors to agree a full and final settlement one way or the other. If you can agree things amicably that's great, but I'd still get the legal chaps to draw up a final agreement that neither of you can go back on.

The house won't be the only asset (or liability if you consider the negative equity).

It may be that the person leaving should receive a payment for carpets and other furnishings left behind.

Gorgeous_George

I suggest you sell up and pay the £6K redemption penalty. Once sold, any (negative) equity can be shared fairly and finally. This puts closure to the relationship (emotional and financial) and allows you both to move on with your lives.

If one of you wants to keep the house you need to agree a deal. The one who is lumbered with the house and the risk of further falls along with the hassle of selling later may be justified in asking for the full £10K from the other partner (maybe more).

Selling incurs significant costs:
1. EA fees £5K
2. Solicitor £2K

If the other partner doesn't want to sell, let him/her buy you out. You don't want to be left holding the baby.

GG

getmore4less

Starting point is the sell options, is a sale at 180 relaistic?

£6k penalty
£7k fees
£20k negative equity

So you are looking at £16k+ each to get out of this.

Thats the starting point for negotiation if one party is able and wants to take on the house.


I don't thing going down the lets sell later route is sensible, housing slumps tend to be 6y+ so you could be looking at more loss from reducing prices than from the penalty.