Advice please? Mortgage separation...

caromel

I'm a regular reader of MSE, but rarely post, as I usually find the answers I'm looking for, but now, I have an issue that really needs some input.

It looks like OH & I are going our separate ways. Things are just not working out for the long-term between us.

The problem that is bothering me is that our finances are well and truly combined, particularly with the mortgage. Also, we are now 1 year into a 5 year fix (interest only @ 5.29%) with First Direct with just under £120K to be repaid - ERC 2%. Flat was valued at £150k last summer, but I don't think that the value will be that high now...possibly £135k-£140? If the flat is valued at lower than that, then with other debts/costs etc., he will have to find money to give to me.

We have a joint current account which we have both paid into fairly equally for the last 3 years since we bought the flat. No joint savings.

He can't afford to buy me out...his salary is ~£21k, mine is £30k. I have some savings that I can dip into, and potentially my dad will be able to invest some money in return for a %age ownership.

Can anyone please give me some advice on my options?

I don't want to sell as it's a great flat, in a good location, we would lose too much money & I would have nowhere to live. I found the process of buying this place (we were both FTB's) tough & I don't think I'd cope with that again, particularly right now.

Is it a possibility that 1st Direct will allow me to take on the mortgage under the current deal? Effectively having his name removed from the mortgage? Would I have to pay it down to an acceptable level based on my salary? If not, what would be the likely chance of me getting a mortgage on my own for it, in the current climate? I would really like to stay with 1st Direct offset...it's been a great motivational tool seeing how much interest we've been saving each month...~£170 in a year, which is really good considering we haven't had much in offset savings. If I go for a new mortgage, then they would definitely do a valuation, which would affect the LTV, therefore likely increasing the balance that I would need to find...making things more difficult.

I'm just not thinking as clearly as I would normally about all of this, so would appreciate any advice? I use excel to track my finances and had a really good handle on everything, but the hard drive that it was saved on is caput! and I may have lost everything. A work colleague may be able to fix it, but he's on annual leave for another 1.5 wks.

Cheers for any help,

Caromel

caromel

Bump...

Sorry... ;o}

Mrs_Bumble

Is your other half expecting any financial settlement at all?

First contact First Direct to see if they are likely to approve a transfer of equity into your sole name as it will be there decision if it fits with their affordability as you are looking for approx 4 times salary. Assuming that you don't have any other credit committments?

caromel

Thanks for getting back to me, Mrs Bumble.

It will depend on the valuation of the house and totals of other debt and the costs involved in sorting it all out. Basically whatever works out as 50% of profit/loss.

He also 'owes' me some money for his OU fees and the extra I put in his account to keep him away from his overdraft limit, which should all have been paid back by November/December time - approx. £750.

He doesn't really have any money set aside and will obviously need to find some money if he is going to be able to move out. Rental money plus deposit.

We are totally amicable about it all, at the moment. Most of the house stuff - furniture/tv's/fridge etc belonged to me before we bought the flat, so there is little need to divvy that all up. We need to agree on bigger things like computer & sofa.

I know that I need to call First Direct...I just want to be sure of all of my potential options beforehand...I like to work out the pros & cons of all options before I get into anything. It takes forever for me to make a decision on anything! I'm also not so good at phoning about things at the best of times., and at the moment, I'm still feeling fairly delicate! It all seems so final when you actually do something about moving on.

As for other credit commitments, I have recently paid off a ~£4000 loan early...it was £12000 over 5 years and had a year to run, but rate was ~7.1% I think, it had no early repayment charge, so at the time, better to pay off with savings. M&S credit card (balance ~£3770 at 3.9% life of balance) is in my name...don't want to pay it off any earlier than necessary because APR is so much less than mortgage...better to have money offset against mortgage. I have a student loan that has approx. balance of £1500 (it's pre-98 so hopefully will be reducing over the next year!!). The 0% loan on the sofa is in OH's name...~£600 left to pay.

Cheers,

Caromel

Trying_to_be_good

Sorry to hear you're going through a difficult time. Buying a property with someone is a long-term commitment and is difficult to unpick, as you're discovering.

In an ideal world, you and he would split 50:50 all the things that were bought jointly. An option would be for you to 'rent' his half of the property whilst you both stay on the deeds/mortgage.

1. If you want to stay in the flat, and achieve a clean break, you'll need sufficient salary/affordability in the lender's eyes to take on the whole mortgage - this may be a re-mortgage, or you may be able to have the current mortgage put into your name.
2. You would also, ideally, buy him out of his share of the equity, less any legal and mortgage admin/arrangement costs - this, however, can be a flexible arrangement given the priority is point 1. With my ex-husband, I paid him £200 per month for two years as I was maxed on the mortgage extension I could take out, as well as taking on the existing mortgage. This can be an informal arrangement, i.e. not declared to your lender as a 'loan' owing and therefore affecting your affordability/salary checks with them.
3. Any other credit you have will be taken into account when they calculate how much they'd be able to lend you.

Good luck - a call to your lender to see if they will, in principle, allow you to be the sole mortgage holder, is probably a good first step.

You will also have to change the title deeds of the property.

caromel

When you say 'rent' his half of the property, what do you mean? How do we work out how much that would be?

Trying_to_be_good

caromel wrote: »

When you say 'rent' his half of the property, what do you mean? How do we work out how much that would be?

You decide between you - what do you think is fair rent for half the property? But it would mean you wouldn't have a 'clean break' to the relationship. If you can get the mortgage on your own, I'd would think that's preferable.

getmore4less

Two things to work out.

1. Whats the asset/debt situation on the joint stuff so you know if you need to raise cash or he needs to give you something.

2. Can you afford to take the place on.


1. Just needs working out, flat is close to break even since you need to work that out that on a sale price less expenses, what does the rest come to? Since the firesale price of the flat will probably be a lot lower and a whild guess you may need to be a little flexable give or take a couple of £K to keep it amicable and focus on the real problem No2.


2. Important thing here is can you afford it, then will the lender let you do it, help from family should make this possible, an outright gift or equity injection for part ownership would help a lot, £120k on £30k is a bit high.


Remember most of the stuff(eg sofa) that was bought joint is close to worthless second hand.
PC unless something special is £300 thats the cost of a new one so you have one each.


In a keep him on the mortgage for a while situation, then the way to work this out is he continues to pay the mortgage share so still own his equity but you pay him rent for the market value of his share.