Advice needed - buying someone out on a mortgage

Cookie1712

I'm confused and had so much conflicting advice - here's the scene.

A few years ago my wife brought a flat jointly with a friend of hers (the friend was looking to invest, my wife to live in and it all worked out quite well). My wife put in a deposit of approx £10k while the friend didn't put any deposit down.

Since they brought the house, my wife and I met and we now want to move to a house of our own. We suggested putting the house on the market, but my wifes friend has decided she actually quite likes the place and would want to buy my wife out.

Question is - how do we work it legally such that as well as taking on the remainder of the mortgage, my wifes friend pays her back the deposit plus the difference in the profit made on the property in cash.

My wife clearly doesn't want to just sign over the mortgage without the cash, and her friend doesn't just want to give my wife cash before she signs over the mortgage. Is there a legal process for doing this?

I ask on here because our mortgage broker said not to tell the solicitors or mortgage company that money was changing hands between us. We can't work out why this is???

Any help gratefully recieved

DVardysShadow

The difficulty may arise if friend does not earn enough to qualify for a new mortgage. If money changed hands or the status quo changed, the lender might call in the loan.

G_M

When going in to an agreement like the one your wife and her friend set up it is always important to have a clear agreement about how it will be ended. If the the property is sold, if one party buys out the other, if....... who pays who how much? How is profit or loss in house value shared? etc.

I'm assuming no such agreement was put in place? So:

Has the house value increased? reduced? Same?
Have they each contributed equal amounts towards mortgage?
Have any improvements been made to the house and by who?
Was the £10K seen as fixed contribution (ie a £5K loan to the friend) or as giving your wife an extra % in the equity (ie if original value was £100K then your wife had 60% equity in the house to the friend's 40% - relevant if house value has risen)

This is really a minefield without initial agreement, but if the friendship is (still) sound, then these issues can be resolved /agreed now through discussion.

If the friendship breaks down ....