Buying ex partner out of mortgage / house

guidarufino

Not sure if I've put this in the right thread, it might be more of a dilemma type thing but here goes.

My partner and I recently split up but unfortunately have a house and mortgage together. It's my intention to buy him out and take over the mortgage (with some family help) but the question is how much to offer him.

He put down a large deposit, £85k and I put in £10k. We paid £230k for the house.

We've paid around £10k back in the time we've lived here.

So my thinking is that I should offer him £90k, i.e. his deposit plus half of what we've paid off. Actually I paid a bit more than him over the years as I earn more so the capital repaid should probably be split more like 60/40 but that just complicates it more.

Because the question I'm wondering is, suppose the house values at more than what we paid for it, say £250k, would I have to give him a share of the profit?

My argument is no because firstly we've had no viewings since it's been on the market so it doesn't look like any is interested in buying anyway. And secondly if we did sell it and make a profit, a lot of that would be eaten up by conveyancing and estate agent fees. Thirdly if it's gone down in value, you can bet your bottom dollar that he won't want to accept less than £90k!

Perhaps I could say to him before the valuation comes in that we agree that he just gets what he's put in regardless of what it values at... It's all so complicated it's making my head spin!

CloudCuckooLand

You have to get it valued, whether by multiple EAs or a surveyor, or using the ultimate valuation of a selling price.

He probably won't - and to be fair - nor would you (if the situation was reversed), agree to a figure without having a valuation.

Depending on how long since you bought and your region, the likelihood of value being different from when you purchased can vary wildly, so you need to have a decent source of value.

You need your lender to agree that your income can support taking the mortgage over on your own, too. They may not.

guidarufino

I need to borrow £217k. Redemption figure currently is £127k so I need £127k + £90k = £217k.

I have already had a mortgage agreed in principle for £166k (5x income amazingly!). I can manage the monthly payments quite comfortably on interest only. I have asked my parents to help me out with the balance. I'm then going to get a lodger and use the revenue from that to pay them back. So the LTV will be fine as I'm only (!!!) borrowing £166k against the value of the house. The surveyor's coming tomorrow so we'll see then.

i guess my question was more of a theoretical one. When buying someone out of a property, generally speaking do people just give them back what they put in or do they give a percentage of any profit? Likewise, if the property has lost value, does the person being bought out get less than what they've put in?

Thrugelmir

guidarufino wrote: »

I have already had a mortgage agreed in principle for £166k (5x income amazingly!). I can manage the monthly payments quite comfortably on interest only.

An AIP is just that. More hurdles to join through. So if asked for your method of repayment of the mortgage?

guidarufino

I can cover the £166k mortgage comfortably on my salary, interest only. Repayment would be doable but tight. The rest of the money will come from my parents, details of how they're going to get it tbc. But that's really nothing to do with the bank. As far as they're concerned, I'll be putting down £50k in addition to my existing equity.

Obligo

"Hi guidarufino,

Assuming you are looking for a remortgage of £225k (£135k mortgage + £90k buyout) you first need to consider how much you are able to raise and whether you will be able to afford the new mortgage on your own.

Firstly, most lenders will lend up to 4 x's your gross annual income. (4.5 x's at a push, but your then limited to a small no. of lenders) - so are you able to afford to raise the 90k?

Secondly, if you borrowed £225k against a property valued at £250k your 'Loan to Value' (the loan size as a percentage of the property value) will go from 54% to 90%. This will have a huge impact of the mortgage rate that you are likely to get. - in todays market, a 90% 2 year fixed rate could be 3-4% MORE expensive than a comparable 55% LTV deal.

With this in mind, what you need to do is find out how much you are able to borrow and what the likely monthly payments would be before starting any kind of negotiation with your ex-partner."

themull1

I didn't think Banks were doing interest only now.

dimbo61

Its simple you cant afford to take over the property
Sorry to say this but its too expensive even with help from parents
Sell up and rent for a while
Rates have never been this low and can only go up please consider this

Thrugelmir

guidarufino wrote: »

I can cover the £166k mortgage comfortably on my salary, interest only. Repayment would be doable but tight. The rest of the money will come from my parents, details of how they're going to get it tbc. But that's really nothing to do with the bank. As far as they're concerned, I'll be putting down £50k in addition to my existing equity.

Your ability to service the debt and repay the capital is very much in the interest of the bank.

Annisele

guidarufino wrote: »

I can cover the £166k mortgage comfortably on my salary, interest only. Repayment would be doable but tight. The rest of the money will come from my parents, details of how they're going to get it tbc. But that's really nothing to do with the bank. As far as they're concerned, I'll be putting down £50k in addition to my existing equity.

I'm not sure I quite follow you.

At the moment, you and your ex jointly owe £127k on a house worth ~£250k. You want to borrow a further £39k from the bank, as well as £51k from your parents.

I don't see how the bank gets another £50k equity put down? To me it looks as though the bank's risk is greatly increased - because it can only chase one borrower rather than two, and the single borrower remaining has debts of more than five times salary.

The bank is definitely interested in your entire financial position, including your debt to your parents, when it decides how much money to lend you.

guidarufino

Thanks for all the replies, I've probably not been very clear in explaining everything. @ Dimbo, if I could sell the house I would but we haven't had a single viewing in two months and it doesn't seem likely that it will sell any time soon. And living with my ex is absolutely unbearable. So I need to find a solution which gets us both out of the current mess.

This is doubly true now because the valuation's come back at just £215,000, £15,000 less than what we paid originally. So assuming that valuation is accurate, we wouldn't be able to recoup what we paid for it anyway, even assuming we could sell it which we can't.

Which takes me back to buying him out.

Redemption figure from current lender = £127,000
Agreed mortgage for me = £161,000

The question is now how much to offer him to buy him out. He put £85,000 deposit down and we've paid around £10,000 off the mortgage since we've been there. So in theory I could offer him £90,000.

BUT the house is worth less now than when we bought it. So I'm thinking I'll offer him £85,000. In other words he gets his deposit back but nothing else. If he accepts that then,

Total borrowing requirement is £85,000 + £127,000 = £212,000
£161,000 of which comes from me, £51,000 from my folks, details to be arranged.

My question is and the point of this thread was about how much to offer him and how much is fair. If the house really has lost £15k in value, then you could argue we should share that loss. But I know he's unlikely to take less than his deposit back and may even baulk at not getting his capital repayments back. Though having said that, he did originally make some comment about getting a share of the profit so I guess that means he should take a share of the loss too right?!

Moral of the story, don't buy a house with someone unless you're totally and utterly 100% sure you're going to be with them forever!