Marriage break up - House in negative equity

IWantToBeFree_2

Hi All

Its with a heavy heart that I post this, but really could do with some advice (cannot see a mortgage advisor at the bank until next week...)

My husband has dropped the bombshell that our marriage is over - I hate the house we live in, so I am quite willing to move out. I don't want to keep my name on the mortgage though, which is obviously understandable - I have a job whereby I would probably lose it if I got into financial difficulties and don't want to take that risk despite knowing there would be no way he would screw me over.

He would like to keep the house, but I am worried that the bank won't allow my name to be taken off, due to the negative equity and income multiples. He could afford the whole of the mortgage in his name, it would leave him around £100 a week to live on after all his bills but I don't know if the bank will see this as reasonable.

Are they likely to make us redeem our current mortgage and then remortgage - if this is the case it would probably make it impossible.

Has anyone been through the same? Can anyone shed any light on this big mess!

Thrugelmir

How much negative equity is there?

Do you have savings between you that will enable you to clear it if the property is sold ?

USM

A few questions which will help:

How much is the house worth?
How much is owed on the house?
How much does your husband earn?

IWantToBeFree_2

USM wrote: »

A few questions which will help:

How much is the house worth?
How much is owed on the house?
How much does your husband earn?

We had it valued a few weeks ago and they said £80k but another estate agent thought we would be lucky to get £70k.

Zoopla is showing a value range of £65k - £79k. Its in very good condition and newly decorated throughout.

We owe £83k and we have £5k in offset against this - I am reluctant to plunge the offset into the mortgage but would do so if it was the only option.

Husband earns £22.5k.

koexelek

He should be earning enough to take the mortgage over in his name only then ( which is normally the main issue in this situation)

However, a lender might be more reluctant to discharge a borrower if there is negative equity

ItMightBeUsefulOneDay

IWantToBeFree wrote: »

We had it valued a few weeks ago and they said £80k but another estate agent thought we would be lucky to get £70k.

Take the average as rough guide ~£75k

IWantToBeFree wrote: »

We owe £83k and we have £5k in offset against this - I am reluctant to plunge the offset into the mortgage but would do so if it was the only option.

Husband earns £22.5k.

Why are you reluctant to put this in? I think you're going to need that and more tbh.

A mortgage of £75k on a salary of £22.5k is do-able but the banks might want to see some equity. If they ask for around 15% equity you'll need to find ~£20k to come off the mortgage (£8k of negative equity + £12k of deposit).
I would approach your lender and see what they say about the situation - you might find you only need to clear the negative equity.

IWantToBeFree_2

I've spoke to the lender this afternoon, they have said that the negative equity alone will not stop the transfer, all they will do is look at whether OH could afford the repayments. They said giving them the basic figures, it looks promising but we would need to go into the branch and talk some more. The good news is that every case is looked at by a human, so even if the computer says no, its not the end of it.

I am reluctant to plunge the savings in as it means that I could potentially walk away with nothing at all!

WestonDave

IWantToBeFree wrote: »

I am reluctant to plunge the savings in as it means that I could potentially walk away with nothing at all!

Leaving aside the emotions etc if collectively you owe 83k on a 75k (at best) house, how is it reasonable to expect to walk away with part of the savings and leave your OH with a bigger negative equity problem. Assuming a value of £75k for the house, it would be fair to put the savings against the mortgage to bring the gap down to £3k, and then you owe him £1500 as your share of the shortfall. This is even more the case if you need to be clear of the potential of financial difficulties due to your job. On that basis if he is willing (and the mortgage co agrees) to take over the full mortgage and the house, I'd suggest walking away with nothing is a good deal for you - although emotionally you will probably feel you should get something and may feel a bit exposed with nothing in the bank at the outset.

IWantToBeFree_2

Because we have a joint loan which I will be taking on - plus a couple of credit cards in my name which we have both spent on that I am happy to also pay. If anything, he is getting the far better deal out of this financially - because his share of the loan and the credit cards comes to far more than £1.5k!

blueberrypie

You have to stop looking at it in terms of what's fair, or what each of you wants or what both of you want. You have to look at it from the lender's perspective.

From the lender's point of view, they are owed £83k. The only security they have on this lending is a property which is maybe worth £75k. Right now, if you stopped paying the mortgage and they had to repossess and sell, even if they got that £75k, they'd lose £8k (plus all their costs) - and they could come after both of you, together and separately, for that shortfall.

If your name is removed from the mortgage, the lender's position is exactly the same *except that now they can't come after you for the money*. In other words, they have fewer avenues to pursue should the mortgage not be paid.

Talk to your lender, but don't be surprised if you are told that either they won't remove your name from the mortgage, or that they will only do it if you can pay off a certain amount of the mortgage. If it's possible to come to a separate agreement with your husband regarding who owns who what, do that - but it will have no effect on what the lender requires with respect to the mortgage.

IWantToBeFree_2

blueberrypie wrote: »

You have to stop looking at it in terms of what's fair, or what each of you wants or what both of you want. You have to look at it from the lender's perspective.

From the lender's point of view, they are owed £83k. The only security they have on this lending is a property which is maybe worth £75k. Right now, if you stopped paying the mortgage and they had to repossess and sell, even if they got that £75k, they'd lose £8k (plus all their costs) - and they could come after both of you, together and separately, for that shortfall.

If your name is removed from the mortgage, the lender's position is exactly the same *except that now they can't come after you for the money*. In other words, they have fewer avenues to pursue should the mortgage not be paid.

Talk to your lender, but don't be surprised if you are told that either they won't remove your name from the mortgage, or that they will only do it if you can pay off a certain amount of the mortgage. If it's possible to come to a separate agreement with your husband regarding who owns who what, do that - but it will have no effect on what the lender requires with respect to the mortgage.

See my post above - I managed to have a quick chat over the phone with the lender prior to an appointment in a couple of weeks - they have said that they do a transfer of equity even if the property is in negative equity - all they are concerned with is affordability, and from a very quick view, it looks like he can alone meet their criteria.