Tenants In common - i need an exit plan!!?? its a bit of a drama...

mortgagehelp777

My situation:
I purchased my property with a friend 2.5 years ago for £142k its shared 50:50
Deposit was paid by builders and the repayment mortgage was for £135K over 28 years. It is now down to about £131k
The property is now currently worth about £121K
The mortgage is £800pcm.
If we were to rent the property out we would get about £500pcm after fees, insurance etc

He now has a girl friend and and wants to live with her, i want to move out.
He either wants to still live there and his gf pay half the rental value of the house meaning i have to top up the mortgage by £150pcm

or rent out the entire property and he finds somewhere else meaning we both top up the mortgage by £150 pcm.

Here's were it gets a bit more complicated.

My other friend would like to buy a property with me, he has a £30k deposit he would put down and i would buy with him and we would work out a 50:50 share of the deal, by me paying more of the mortgage.

My question is can i give my half of the property to my housemates gf or even sell it too her. Even though she would be taking on half the shortfall does it still have some value because of the high deposit she would need to save (which she doesn't have) to buy a property herself.
She would pass an affordablilty test by the mortgage lender.

That way i free up my borrowing power to purchase again and i cut my losses?

In the long term i can see why it might seem wise to rent the house and top up the mortgage but one of us is likely to need or want to sell the house within the next five years.

This is so confusing please help??

mortgagehelp777

i could not get additional funding but would a mortgage company still see me liable for my first mortgage and therefore restrict my borrowing power?

Doozergirl

You cannot just transfer with a mortgage in place.

Try to consider the practicalities of buying with the next friend. he puts in £30k, you pay most of the mortgage and after 2.5 years he finds a girlfriend. How much of the flat exactly do you you own at that point? Or any other point?

Your housemate and his girlfriend would have to apply for a brand new mortgage - even for a remortgage the values won't stack up anymore - you are in negative equity so won't be able to secure a new deal. It isn't an option for you and if no-one has any money for a proper deposit, it's not an option for her either.

After 2.5 years (not a long time) your housemate does the inevitable and finds himself a partner; you're in negative equity, paying out more each month than the property is worth in rent over a 38 year term(!) and you still want to buy with another friend (and his money). The situation you are in is about as bad as it gets.

I'd sell up, and try to swallow the £5000 each that you've lost - £150 a month towards that for 3 years to clear the decks is less trouble to deal with than topping up £150 a month forever. If you don't have the money to put in to clear the mortgage then you will need to borrow it - in the form of an unsecured loan agreed with the mortgage lender or another provider.

Start again when you're ready to take it all a bit more seriously

Annisele

mortgagehelp777 wrote: »

My question is can i give my half of the property to my housemates gf or even sell it too her. Even though she would be taking on half the shortfall does it still have some value because of the high deposit she would need to save (which she doesn't have) to buy a property herself.
She would pass an affordablilty test by the mortgage lender.

Frankly, even if it were possible (which it isn't), the girlfriend would be an idiot to take that deal. She'd be taking on a £131k debt in exchange for an asset worth £121k.

But, as others have said, it's not going to be possible. Your housemate and his girlfriend would have to apply for new mortgage, and they'd need a 108% LTV - which they wouldn't get. I'm afraid affordability doesn't come into it; without a substantial chunk of cash to get the loan to at least 95% (i.e. somebody pays £16k off the mortgage), I can't see it happening.

I agree that if you and your housemate want to part company, your best option is probably to sell. Do either/both of you have the £10k (plus a bit for selling costs) that you'd need to fully redeem the mortgage? If not, are you likely to be able to borrow it?

PasturesNew

Out of the frying pan, into the fire ... but still shackled to the frying pan.

Sort your head out.

One property at a time ... and try not to keep hold of them. Set yourself free.

IMHO you need to cut yourself loose of the current house if you can. Sell up. Any involvement with your mate, who's already changed the original deal of sharing a place together, has now hooked up with some bird. So now you can assume you have the potential of two people likely to queer the pitch + the chance of her getting up the duff, or falling out with him soon.

If any one of the three of you loses their job and needs to apply for benefits in the next 2-3 years it could get even stickier.

You're piling risk on risk on risk if you do anything other than try to sell what you've got, swallow the loss and move on.

So, if you now imagine yourself standing on the street, £5k down, fees down .... you'd now need a fresh deposit of at LEAST 10% of a new place to start again.

If she wants to buy into it, they'd have to come up with a deposit again. Let's look at that maths:

£142k House Price
£135k Original mortgage, indicating a 5% deposit
£131k Current mortgage

Now they try to buy:
£121k House valuation
£0k Current equity, in fact £10k negative equity
£109k Mortgage to be found, with 10% deposit, for them to buy it, if they can find one at 90% LTV at all
£12k Short by

£12k Short
£10k Negative equity to pay off existing mortgage

So, all in all, you'd need a combined pot of about £25k sitting around to even achieve her buying your half.

mortgagehelp777

Doozergirl wrote: »

You cannot just transfer with a mortgage in place.

Try to consider the practicalities of buying with the next friend. he puts in £30k, you pay most of the mortgage and after 2.5 years he finds a girlfriend. How much of the flat exactly do you you own at that point? Or any other point?

Your housemate and his girlfriend would have to apply for a brand new mortgage - even for a remortgage the values won't stack up anymore - you are in negative equity so won't be able to secure a new deal. It isn't an option for you and if no-one has any money for a proper deposit, it's not an option for her either.

After 2.5 years (not a long time) your housemate does the inevitable and finds himself a partner; you're in negative equity, paying out more each month than the property is worth in rent over a 38 year term(!) and you still want to buy with another friend (and his money). The situation you are in is about as bad as it gets.

I'd sell up, and try to swallow the £5000 each that you've lost - £150 a month towards that for 3 years to clear the decks is less trouble to deal with than topping up £150 a month forever. If you don't have the money to put in to clear the mortgage then you will need to borrow it - in the form of an unsecured loan agreed with the mortgage lender or another provider.

Start again when you're ready to take it all a bit more seriously

So just to clarify if we want to both move out you think it will be more beneficial to suck up the defecit than to let the property out?

I know its the $1mill question but how long would we have to stick it out before we could return to break even.

And i see your point about buying with a friends deposit.

Tankyou for some hard truths

Annisele

mortgagehelp777 wrote: »

So just to clarify if we want to both move out you think it will be more beneficial to suck up the defecit than to let the property out?

Left my crystal ball at home, but yes.

If you let it, then you're both losing £150 per month at least (probably more than that, once you take into account void periods and the costs you haven't thought of yet - as newbie LLs, unfortunately there will be some!).

In three years time, you could find that you've poured £5,400 each into it, but it's now worth only £100k - so your deficit is even bigger. (On the flip side, it could rise in value - it's not a risk I'd want to take, but I'm not in your position).

The other problem you have is that there's no guarantee your lender will give you consent to let, either on your current interest rate or at all - so it might not be possible to let it even if you wanted to.

PasturesNew

mortgagehelp777 wrote: »

So just to clarify if we want to both move out you think it will be more beneficial to suck up the defecit than to let the property out?

I know its the $1mill question but how long would we have to stick it out before we could return to break even.

And i see your point about buying with a friends deposit.

Tankyou for some hard truths

IMHO Yes.

If you rent it out, you add risk. You might have voids, you'll have additional costs and you might have a bad tenant. You will also have 3 people's opinions all the time about what to do, and they (she) will win every time probably, which'll annoy you.

Also, if you own a property you're not living in and need to claim JSA and LHA, it might mean you can't get your rent covered where you are because you have a theoretical income from your property. Also, in that situation, where will the £150 come from? Same questions to your mate.

If you wanted to stick it out, I think you'd have to be working on figures of 3-5 years just to hope that you're right. Could your mate/gf really wait this long? How'd you feel if in 18 months' time she insisted it was sold as she's now pregnant and they can't afford the extra - and she insists you pay ALL the negative equity to get out of the mortgage because she says they don't have the money to.

Sell now and you're free. You'll be a few quid down, but you'll have fixed your financial position.

mortgagehelp777

Thank you to everyone who has posted, all the advice has been positivly welcomed.

On discussing the situation with my housemate and his gf they have asked is it possible for his gf to take on my half the mortgage in any way?

They feel that could happily live there together for the next 5 years or so and ride out the -ve equity period and still save for a deposit in the future

DVardysShadow

mortgagehelp777 wrote: »

Thank you to everyone who has posted, all the advice has been positivly welcomed.

On discussing the situation with my housemate and his gf they have asked is it possible for his gf to take on my half the mortgage in any way?

They feel that could happily live there together for the next 5 years or so and ride out the -ve equity period and still save for a deposit in the future

That would be at the discretion of your lender. It would be the best way out.