Joint mortgage but not paying - where do I stand for profit??

skintdude

Hi,

I currently have a mortgage with a friend and have been there for 3 years.

I have recently moved out to a rented place with my girlfriend as my mortgage friend has kindly got a lodger in to pay my half of the mortgage, while I live with my girlfriend. So I am not paying any mortgage payment.

It is a 50/50 split mortgage.

Where do I stand if say in 3 years time we are in profit and decide to sell?

Am I entitled to equal share of the profit or not as I have not been paying??

Appreciate your help.

SkintDude.

Cannon_Fodder

Depends on what agreement you have with each other.

He might think, fairly reasonably, that if he has got the lodger to organise/live with, and you do not pay a penny, then why should you get anything for after the date you moved out.

But if, in writing, it says you should get half the profit and nothing has been put in writing to contradict that, then you may well be able to claim whatever profit accumulates.

Money is the surest way to ruin a friendship, so I suggest you and your friend sit down and decide how is should be handled, rather than let it fester and be a big misunderstanding in 3 years time.

Of course, there's a distinct possibility that prices will be the same in 3 years as they are now...if that.

skintdude

Thanks for the reply.

Yes that makes sense. We are quite open with each other so I'm sure we will come to an agreement, and I do kind of understand that I may have to accept less profit, as he has helped me out in the long run.

Say for example it ended up that I have paid for the property for 3 years, and not paid for another 3 years and decide to sell in the 6th year, what profit should I be entitled to?

For arguments sake and to make it easy, lets say we had £10k profit. Obviously if I was there for the whole duration of the 6 years it would be simply split 50/50 with £5k each.

So how much do you think I should be entitled to as I have only paid for 3 years?

beecher2

I think it'd only be fair if you worked out how much equity there was in the property now, and agree that you should be entitled to half of that sum when/if the property is sold. I don't think it'd be fair to work it out as a percentage of where you stand in 3 years' time. I might think differently if you were paying any money into the house - what'll happen with maintenance costs and insurance bills?

Cannon_Fodder

Well, on your £10k figure, if you were there half the time, half of the half...i.e a quarter, £2,500.

But if he has "carried the risk" of a downturn period, while you have "sat it out", he might not unreasonably say you should come to a figure now, and call it quits. But that requires a re-mortgage, and his income might not support it on his own.

Or, what happens in 18 months if you decide you want to buy with the girlfriend but your friend doesn't have the income to support your joint mortgage and therefore you have to stay on it...stopping you get a second mortgage, as your income won't support two either...

Suppose you two have to re-mortgage, the lodger doesn't cover the increase, who will pay the shortfall, and get what % of any potential profit..?

Minefield. For £2.5k of debatable possibility, best off out of it in a way that suits both of you, before timing screws with your options.

skintdude

Ahh, that makes it more confusing as we are in negative equity at the mo?? I am paying a small contribution of £50 per month which I think goes towards flat/grounds maintenance...

skintdude

Ok, I think basically it is just about coming to a 'personal' agreement with my friend as apposed to a 'legal' agreement.

Thanks for your advice.

beecher2

skintdude wrote: »

Ahh, that makes it more confusing as we are in negative equity at the mo?? I am paying a small contribution of £50 per month which I think goes towards flat/grounds maintenance...

I wouldn't think it fair for you to have any of the profit then, but that's just my view. You need to sit down with your friend and work it all out and get it on paper. You also need to think about who would pay if essential repairs need to be done. Presumably you're on the SVR at the moment so you also need a plan for what happens if/when interest rates go up. In 3 years' time there may not even be any profit, if you're in negative equity at the moment. Lots to discuss with your friend and best to get it covered before these situations arise.

asharon

I think if you were equally contributing to all of the upkeep/maintenance of the property then the fact there is a lodger would be immaterial to a share of the profit, but also that if a lodger moves out for a period that you would be responsible for the rent for the shortfall.

skintdude

I think that I would feel bad if I got equal profit so I'm ok with that...

But how about this senario - I decide to move back into the property 1 year later. (say I break up with my girlfriend for e.g.)

What profit is taken off my share? Would the easiest way be to get an average property increase/decrease year on year and then minus that yearly 'average' price from my profit??

beecher2

skintdude wrote: »

I think that I would feel bad if I got equal profit so I'm ok with that...

But how about this senario - I decide to move back into the property 1 year later. (say I break up with my girlfriend for e.g.)

What profit is taken off my share? Would the easiest way be to get an average property increase/decrease year on year and then minus that yearly 'average' price from my profit??

Any scenario we come up with would just be showing what we'd be happy with - your friend might see things completely differently. Best to speak to him about what he's happy with.