Adviced needs on transfer of equity

Coxy7

Hi,

I could do with some advice please. I brought a house about 18 months ago with my now ex partner. We have a joint mortgage on a 'Dream Start' deal from Barratt Homes. basically we have a loan from Barratts for 15% of the mortgage and a mortgage for 85% of the value.

I previously had a flat that was in negative equity which i had to get a £10k loan to cover when i sold it and brought the new house which i am paying back for 3 more years.

The new house itself is probably in around £5-10k negative equity.

Currently i am living there and paying all of the mortgage which its self is almost £1k a month and have 15 months left before the early redemption charges expire.

Due to the fact it is in negative equity selling isnt really an option so i have been looking a transfering it all to my name. This is proving to be very costly with solicitors fees arounf £600 due to the equity loan and the leased garage with the property, and £160 to get the name on the mortgage as just mine.

My question is really, is this a wise thing for me to do in getting it all in my name?

My ex is happy to walk away with nothing, which isnt suprising it is in negative equity. I would prefer her off the mortgage as she has a lot of dept and is very bad with money and now we have split i dont want it effecting me when her only assest it the house.

My main concern is taking on to much and ending up in a real bad financial postion and in a few years being unable to sell and losing a lot more money.

Do i have any other options?

Any advice of suggestions are much appreciated.

Thanks

Senior_Paper_Monitor

Unless you can convince the current lender that your current financial position (debts/earnings/credit rating etc) enables you to meet affordability and other criteria to take the mortgage in your own right (and at 100+ LTV, as I understand it, this is most unlikely) they will simply not 'release' your ex from her responsibilities (and joint and several guarantee).

Her apparently unimpressive credit rating (and enthusiasm to walk away from another debt) is going to make this difficult.

Sale and a loan for the shortfall (I know idea what this is) may be possible - but they will keep both parties on that guarantee (and in the 'real world' means you will have to pay it) may be possible (but by no means 'a given').

Unfortunately the threat of protecting her credit rating may not work in such circumstances. For you it should be an objective.

The downside ('additional downside' I should say) of this is that without an additional agreement in place, there is a danger that even if you work your way through this and eventually get out of negative equity there is a danger she will start to claim 'her half'.

Best advise I can give is either:

1) sell and settle to apying the shortfall yourself

or

2) look for a formal agreement (with legal advice) at this stage where she recognises that you will continue to meet the ongoing liability (as she cannot be released) but she cannot benefit from the payments made by you in the ultimate event of sale.

I recommend you check your credit report and look to sever all other financial associations.

Sorry - no real answers there.

Coxy7

Thank you for you reply.

I have already spoken to my mortgage lender, they are happy to transfer the mortgage in to my name as i meet their requirements. The mortgage is for 85% of the value £153000 the loan is a 10 year interest free loan from Barratts for 15% which is £27000 and is repayable in 10 years time, or if i sell before. If i sold for less than i brought i would still only have to pay back 15% of the value, the same would also go for if it sold for more.

So for about £800 i can transfer it all in to my name, my concern is though if this is a sensible thing to do, as i am effectivly signing on more dept in the negative equity. In the hope that eventually the house prices rise and i am no longer in negative equity.

Selling would cost more and also need to get a loan to pay the negative equity off, on top of the £10k loan i have and effectively leave me with nothing.

So i guess i am trying to work out which is best option of the two



The loan

Senior_Paper_Monitor

I am now confused whether propert is in negative equity or not (and whether this includes the secured loan or not) but this is academic if you are able to take the transfer of equity and believe you can claw it back into a positive situation over a reasonable time,. If you decide to do so ....

Ensure you end all financial associations with the ex (the no future claim issue becomes academic).

Good luck

Trollfever

Have Barratts got a charge on the property and have they agreed to the restructuring?

Coxy7

Appologies if i have been unclear.

We purchased the property for £180,000. They are still being sold by Barratts for that price brand new, similar houses that are being resold are selling for about £10k less than the original purchase price. So i am making the assumtion i would be in about £10k negative equity if i was to sell.

I am not sure what you mean by 'Have Barratts got a charge on the property'?

I have been trying to speak to someone in there sales office for weeks and they are not very helpful to say the least. So I still need to find out if they agree to the restucturing. I am hoping this shouldnt be a problem?

The fact that is a shared equity mortgage seems to be making things a lot more complicated and pushing the cost to amost double the amount it would normally cost to do a transfer of equity,

Coxy7

After speaking to a few people I am swaying towards selling up and taking a hit now.

Originally I thought taking it on myself would be a good option as i would still have the property, but I have a feeling that in the future it would end up costing me a lot more if i wanted sell etc unless house prices increased drastically, so i feel i would be better taking a hit now between both of us.

With negative equity do you need to have the money to pay the mortgage lender as soon as you sell?

My ex has very bed credit, and no money and therefore wouldnt be able to raise any money, would it be an option to arrange repayment via a loan of some kind with the mortgage lender?
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luckyfool

Coxy7 wrote: »

After speaking to a few people I am swaying towards selling up and taking a hit now.

Originally I thought taking it on myself would be a good option as i would still have the property, but I have a feeling that in the future it would end up costing me a lot more if i wanted sell etc unless house prices increased drastically, so i feel i would be better taking a hit now between both of us.

With negative equity do you need to have the money to pay the mortgage lender as soon as you sell?

My ex has very bed credit, and no money and therefore wouldnt be able to raise any money, would it be an option to arrange repayment via a loan of some kind with the mortgage lender?
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As long as you sell for more than the mortgage balance the lender is going to get their cash back 100% anyway. The debt would be to the builder (Barratts). For the lender to agree to this type of transaction Barratts would have to have agreed to a Mortgagee Protection Clause which means the lender gets their money back first (and in return the bank treated the Barratts equity loan as a deposit). Any shortfall between the net sale proceeds of the property after repayment of the mortgage, and the 15% of the sale price that you will owe Barratts will be a debt that both you and your ex owe Barratts. The builder may well be willing to agree a repayment schedule for the debt, but bear in mind it is joint and severally liable debt. i.e. If you ex tells them to take a hike they arent willing to pay a penny, then Barratts will almost certainly expect you to repay it all. You can't just sell, agree a repayment schedule for half the shortfall and walk away.

Senior_Paper_Monitor

The info you are supplying is a little sparse for constructive advice BUT .....

If you sell the lender(s) - I am not exactly sure of Barratts position in this type of contract (we try to avoid these deals) but they consider carrying their share over to your new purchaser (you need to speak with them) - and will want clearing (and don't forget the selling costs - legal, estate agents etc) in total - but MAY consider a loan on any shortfall (if so, although they will probably want both parties on that loan, there appears little chance that she will be paying anything so you need to be prepared/able to service total repayments).

My guess is that renting may also put your monthly costs up compared with mortgage.

If you sit down with a good broker (possible one with debt counselling experience/qualifications) they will probably be happy to help you compare the impact of all alternatives, and probably not charge you for the exercise, if you feel such help would be useful.

You are certainly taking the correct approach in facing up to the issues at this stage rather than burying your head as many do until the oncoming train is about yards away!

luckyfool

I think what the OP is saying by £10k in negative equity, is that it has fallen in value by around £10k. Given that they did not put a deposit down you could consider that negative equity given that the 100% purchase price was made up of an 85% mortgage, and 15% equity loan. From my reading of the situation if there is a sale now it is likely that the mortgage can and will be repaid in full. From the rest Barratts will take the balance and any shortfall to 15% of the sale price will be on the OP and her partner. To go through with a sale though she would need to have cash money to pay the solicitor and estate agents.