Advice on housemate buying me out

lauraplatt11

Hi,
I bought with a friend a few years ago and we have agreed that he will be buying me out.
We have agreed on a value of the property - £250,000.
This is the same price that we paid for the flat almost 4 years ago.

How do we figure out how much money he will need to give me?
We have both put equal amounts into the property.
We paid £12,500 deposit each and now have £205,000 left against the mortgage.

He tells me the figure will be the value of the property minus the amount left on the mortgage (£250,000 - £205,000), divided by 2 (£22,500).

I can't find any existing formulas to stick to on the internet so if anyone can offer me any advice that would be great.

Thanks

MegaMiniMouse

lauraplatt11 wrote: »

Hi,
I bought with a friend a few years ago and we have agreed that he will be buying me out.
We have agreed on a value of the property - £250,000.
This is the same price that we paid for the flat almost 4 years ago.

How do we figure out how much money he will need to give me?
We have both put equal amounts into the property.
We paid £12,500 deposit each and now have £205,000 left against the mortgage.

He tells me the figure will be the value of the property minus the amount left on the mortgage (£250,000 - £205,000), divided by 2 (£22,500).




I can't find any existing formulas to stick to on the internet so if anyone can offer me any advice that would be great.

Thanks

You can't do it like that if you have a joint mortgage - you will have to pay off the existing mortgage jointly, and then you will have to remortgage in your sole name

o dear o dear, why didn't you work out a get-out clause when you originally bought?

MMM

ps obviously, you would arrange your re-mortgage first, and then pay off your half of the joint mortgage out of the proceeds. Your flatmate would have to find the other half to enable the lenders to discharge your joint liability

TrickyDicky101

MegaMiniMouse wrote: »

ps obviously, you would arrange your re-mortgage first, and then pay off your half of the joint mortgage out of the proceeds. Your flatmate would have to find the other half to enable the lenders to discharge your joint liability

That doesn't sound right - the OP would need to remortgage for the full amount (if (s)he is able) of £205k plus his friend's share £22.5k and would pay off the full mortgage using this. The other party to the original mortgage thus doesn't need to raise cash to pay down his half of the mortgage.

[Deleted User]

Hi,

look at it this way.

Suppose you both decide to sell the house, lets say to Mr Big.

So, Mr Big pays you £250,000, you pay the mortgage £205,000, leaves you the £45,000, less expenses, which you will share on the sale, and split the remainder.

Your mate then buys from Mr Big, and arranges his own mortgage for that and will be responsible for all expenses.

So, you will get £22,500, less your share of the expenses on the sale of the house.

Oh, and remember, to get all utilities etc, squared up to date of sale, (or when you move out) as you will have your share of that to pay as well.

Hope that makes sense.

getmore4less

lauraplatt11 wrote: »

Hi,
I bought with a friend a few years ago and we have agreed that he will be buying me out.
We have agreed on a value of the property - £250,000.
This is the same price that we paid for the flat almost 4 years ago.

How do we figure out how much money he will need to give me?
We have both put equal amounts into the property.
We paid £12,500 deposit each and now have £205,000 left against the mortgage.

He tells me the figure will be the value of the property minus the amount left on the mortgage (£250,000 - £205,000), divided by 2 (£22,500).

I can't find any existing formulas to stick to on the internet so if anyone can offer me any advice that would be great.

Thanks

Looks about right to me as long as you paid the mortgage and any other relevent costs equaly.

Now the issue is costs and who will pay those?

You need to check if there will be any stamp duty you are close to the £125k threshold for your bit probably not but don't asume I would have to have a good read before I could say not for sure.
http://www.hmrc.gov.uk/sdlt/intro/rates-thresholds.htm


Has a lender agreed to give them a mortgage?

Troubled_Joe

If I was your housemate I'd insist that the value was calculated less the notional costs of sale i.e. estate agency fees otherwise you are disposing of your interest without having to pay these and he is left with paying them all when he eventually comes to sell.

Wh05apk

Your flatmate, will not be remortgaging as such, if they stay with your existing lender it will be a "transfer of equity+ further advance" (if they need to borrow further funds, which may be difficult as you do not have much equity) although they may be able to combine this with a remortgage to achieve a better rate?

Your flatmates calculations sound about right, would you be prepared to sell your share for £22,500? if not then hold out for more - or offer to buy his share for £22,500! but given that anything just over £250k attracts higher stamp duty so therefore tends not to sell until it is substantially over that figure, and that is what you paid for it 4 years ago, it sounds right.

Wh05apk

Troubled_Joe wrote: »

If I was your housemate I'd insist that the value was calculated less the notional costs of sale i.e. estate agency fees otherwise you are disposing of your interest without having to pay these and he is left with paying them all when he eventually comes to sell.

Fair point, the flatmate would also be paying a a fair bit in fees, so if they are offering £22,500 bite their hand off!

lauraplatt11

Thanks for you help everyone.
This has put my mind at rest.
The mortgage is going to be transferred into his name and the lender has already said yes to this.
With regards to estate agent fees - does anyone know roughly how much this is? My flatmate has asked for this.
Thanks

lauraplatt11

Thanks for you help everyone.
This has put my mind at rest.
The mortgage is going to be transferred into his name and the lender has already said yes to this.
With regards to estate agent fees - does anyone know roughly how much this is? My flatmate has asked for this.
Thanks[/QUOTE]

Foggster

Can I ask why there would be estate agency fees for this type of transaction (I am also looking to similar with buying my husband out).