Buying someone out of a mortgage

gareth336

Me and a friend got a joint mortgage on a house about a year ago. I am now looking to get a house on my own and my friend would like to buy me out. Once we have agreed an amount where do we go?

Would there be any potential problems with the mortgage company with him being responsible for the full amount of the loan rather than only half of it, considering they took both of our incomes into account when first offering us the mortgage?

What sort of paperwork would we need to get hold of to make everything official?

Is there anything else we need to consider?

JoolzS

I would consult a solicitor to see where you both stand.

From your post it would appear that neither of you has a clue about owing property.

Consult a solicitor.

Julie

opinions4u

gareth336 wrote: »

Me and a friend got a joint mortgage on a house about a year ago. I am now looking to get a house on my own and my friend would like to buy me out.

You need to agree a price and get then request the consent of your lender. If they say "no" you're snookered. You will need to involve a solicitor to change the ownership of the house and the mortgage deed. Budget around £500ish.

You say your friend would like to buy you out. If the property is in negative equity it may be that you should be giving your friend money for taking on the whole liability in a falling market. How much did you pay for the house? What is it worth now? How much do you owe on the mortgage? What is your friend's annual income?

Once we have agreed an amount where do we go?

I would consider the local pub as a realistic option.

Would there be any potential problems with the mortgage company with him being responsible for the full amount of the loan rather than only half of it, considering they took both of our incomes into account when first offering us the mortgage?

Yes. If they don't think he can afford it, you're in trouble. Even if he can afford it, they don't have to release you from the commitment. If, for example, the mortgage is close to or higher than the property value they may prefer the security of having you to pursue if he doesn't pay.

What sort of paperwork would we need to get hold of to make everything official?

See your lender first to see if they will consider it. If they will, you then need to talk to a solicitor.

Is there anything else we need to consider?

Turning the clock back, you should perhaps have considered this day arriving before agreeing to the mortgage. When friends buy together it is almost certain that they will go their separate ways at some point in the short to medium term. This doesn't, however, give them an automatic right to walk out on their financial commitments.

koexelek

gareth336 wrote: »

Would there be any potential problems with the mortgage company with him being responsible for the full amount of the loan rather than only half of it, considering they took both of our incomes into account when first offering us the mortgage?

a huge problem.

Unless his income now covers the mortgage fully, or he can put someone else on the mortgage in your place with similar income to yourself, they won't do it

gareth336

JoolzS wrote: »

From your post it would appear that neither of you has a clue about owing property.

Thanks JoolzS. Really helpful. I guess people shouldn't ask questions on a financial forum.

A genuine thanks to the other 2 people who answered. You confirmed some of the obstacles I thought may exist and threw in a few others that I hadn't thought about.

PasturesNew

It is unlikely it would be possible ... I can completely invent your situation to demonstrate:

2008 bought property £135k
Both earning £20k
Put down a £15k deposit
Mortgage issued on 3x joint salaries

2009 house worth £115k
You are earning £22k
To raise the mortgage you'd need (say) 20% deposit = £23k
Mortgage to raise = £115-£23 = £92k
Mortgage extended to you £92k
.... but you still need to:
- come up with £23k yourself
- get some money off your friend to settle the negative equity

And the numbers might not even work out that "close".

JoolzS

gareth336 wrote: »

Thanks JoolzS. Really helpful. I guess people shouldn't ask questions on a financial forum.

A genuine thanks to the other 2 people who answered. You confirmed some of the obstacles I thought may exist and threw in a few others that I hadn't thought about.

I believe I suggested consulting a solicitor. And then threw in a few observations. I have no doubt that my original suggestion was correct.

Julie

silvercar

JoolzS wrote: »

I believe I suggested consulting a solicitor. And then threw in a few observations. I have no doubt that my original suggestion was correct.

Julie

I doubt it, consulting a solicitor would be a waste of time before finding out if the lender would agree to a transfer of equity.

As others have pointed out, the lender will want to see that one party can afford the mortgage on their own, before allowing the other party to walk away from the financial commitment.