Joint Mortgage Debt. What happens if you have to walk away?

The_Next_Verse

Just a quick question to see if anyone can help or has any experience with this.

I have recently found myself in the position where I am not able to spend less at my current house than I earn.

Long story short, my ex partner and I split 18 months ago and he walked away from the house without paying for anything toeards the mortgage as he felt that as I was living in it, he shouldn't have to pay. Over the last 8 months he has tried to bully me into taking the mortgage solely into my name which NR wouldn't do (unsurprisingly as I can't afford it!). Yesterday I come home to a solicitors letter saying he may attempt an order of sale to get away from the property.

Try as I might, I can't afford the house and I've finally accepted this and have made arrangements to move out. My outgoings are about £200 more than my incomings.

The house itself is currently in approximately £40k negative equity and I intend to go to see a solicitor to say that I'm moving and can only afford 50% of the mortgage costs and won't contest an order of sale if he wants to proceed.

He can't move in instead as he has now moved, and has two children. (Its a 1 bed house).

I have no savings and can't afford this debt which will be undoubtably there when the property is sold.

I was wondering, if the house was sold by court order, what would happen to the debt?

I'm sorry if my post is unclear. I'm really stressed and upset about the whole situation and am just looking for some advice for any way forward.

I don't know much about this sort of stuff as I've always had a good credit rating

sorry about the long post.

~The Next Verse

StuTheDon

Hi,

If the house is sold and there is a £40k difference in what you sell it for and what the outstanding mortgage is, then the bank will chase you and your ex jointly for the £40k.

You are both equally liable for the full £40k - so for example if your ex declares himself Bankrupt you would be left having to pay the full £40k shortfall. Likewise, if you declared BR, then he would be liable for the full amount.

The best way forward would be to look into a loan of £20k each to cover it - but I strongly suggest you take legal advice.

Is there any chance that he could help contribute to the mortgage for a few years in the hope the price rises eventually? It may sound weird but it may cost you a lot less in the long term.....

Mrs_Bumble

Take legal advice for yourself, I would be interested to hear what your legal adviser thinks the benefits in a forced sale through court order would be when the property is £40K in negative equity. If a sale is going to go ahead then it would be better if it went ahead without any increased legal costs as that helps no one.

Contact Northern Rock and see what their position will be if you go ahead and sell the property in negative equity.

Can you let the property out and cover the mortgage payment? You would need permission to let.

This is a joint mortgage and as such you are both jointly and severally liable for the debt and any subsequent debt if there is a negative equity sale and the most reasonable thing would be to split whatever outstanding debt equally between both parties.

See what legal advice you get and what Northern Rock say.

The_Next_Verse

Thanks so far for your comments and responses.

Firstly, my solicitor thinks that my ex partner is crazy. Originally, I thought I was able to afford the property and was quite willing to take it on. (Including his share of the negative equity - this was before I saught legal advice.)

I applied for a change of parties on the mortgage which was declined, due to the income level that my new partner and I have. They advised us that we would have to pay off approx £13k from the mortgage and then they would be happy to accept the change of parties.

Once he found out about this, he started going through a solicitor to bully me into taking it on. I think originally he thought I was lying... but really don't know.

My solicitor originally wrote back to say that if the property is in negative equity, the most logical thing for him to do would be to pay the £13k (saving himself £7k if he was to pay half of the current negative equity) than pay £20k each or £40k jointly and severally if one wasn't able to get a loan for £20k (- this is me in this case.)

The other offer we offered him was to pay half of the mortgage and any overpayments he was able to make to reduce the balance by £13k as soon as possible, thus allowing the change of parties faster.

His solicitor contacted me and said he wasn't able to do either and did I have any other suggestions to move it forward before they applied for an order of sale.

On reciept of this, I went through my finances for the first time and opened my eyes and accepted that there was a good reason NR didnt accept my application as I just couldnt afford it.

NR won't let the sale go through without an order of sale due to the negative equity being so large and that I have been completely upfront to advise that I just can't get £20k, let alone £40k.

He refused to pay half (as above) but i'm going to have to suggest it again when I see my solicitor again on Friday as I now can't afford to pay the full rate alone as I have already made arrangements to move. I believe that things will only get worse for me financially and I'm pretty sure emotionally if I stay in this house.

I can't let it out, as unfortunately my financial situation doesnt allow me to make repairs to the property and he refuses to help. I wouldn't rent it, lets say that. Also, it's only one bed, so any rental costs wouldnt cover the mortgage.

I'm seriously considering bankruptcy as I can't see any way of coming out of this with my credit rating intact.

~The Next Verse

katrina_suzanne

Hello,

It sounds like he will have to accept that he can't get out of the joint mortgage without paying half of the negative equity or your offer of £13K (which seems very reasonable to me - seeing as he's jointly liable). If he forces the sale, he may have accept a higher amount of negative equity.

I would only look at bankruptcy as an absolute last resort - you'll struggle to get credit for years - and that's not just going to cause problems with getting a mortgage - think about mobile phone contracts, rent, credit cards, the next DFS sofa sale(!) etc. Any credit you get in future will be at a 'high risk' interest rate. You would be making a short term 'saving' of £20K, you will lose any assets of value, and fees for the insolvency service and courts would be taken out of your assets. It would stop you applying for certain jobs in future, you can only get certain types of bank accounts, and he would be lumbered with your full debt (unless he goes bankrupt too) - which wouldn't be entirely fair.

It's not all bleak - if he does end up accepting the £13K, then it would help you meet mortgage repayments in the short term, and if you sell the house and get a loan to pay your half of the equity - then at least you're rid of him and you can hold your head up high!

If he forces a sale, he may be doing you a favour. I personally wouldn't threaten that you will go bankrupt, because he may well go bankrupt himself and leave you with the full debt.

I hope it goes well for you, good luck.

The_Next_Verse

I don't want to go bankrupt by a long shot. I've resigned myself to selling the house now. I can't afford to pay out £200 per month more than I earn.

If the mortgage company accept a reasonable payment agreement on any debt, I'd definitely consider it.

If he would pay his full share of £20k liability then I may be able to move back and renegotiate payments and stay.

He wants to pay nothing, and I think that's so unfair as if the house had equity, he'd be first in line with his hand out. *Sigh*

I know you've mentioned getting a loan for my share, unfortunately I've enquired about it and there is no chance. I just don't earn enough.

~The Next Verse

katrina_suzanne

mmm... tricky.
If his solicitors know that you can't afford a loan, they may realise that forcing the sale would be more problematic for them than they realise. See what your solicitor says - it may help you.