What happens to mortgage in relationship breakdown?

tododo

Repost as posted in wrong subsection


Hi all

Just posting for a family member
Had some bad news today regarding a family member who's relationship has broken down with partner

They own a house together and now comes for the tricky part

As far as I know so far they have a mortgage of £148000 (joint mortgage).....my sister put a deposit down of about £30K he put nothing

My sister is planning to buy the partner out - how does this work??

Is it just a case of paying him the equity he has put into the house over the past three years - what about the mortgage fees too? We really have no clue how it all works - I assume a solicitor will be needed too

Also she is self employed - will this be difficult when re-mortgaging in her own name in the future

We are just trying to find out how it all works - as there is 2 year old involved we want to make sure the sums add up before a decision is made

I dont have all her earning details yet but it looks like she has saved almost £20k ready to buy him out - not nice I know so looks like its been coming for a while

Thanks for any advice, for the baby we want to get the facts spot on

kingstreet

Was any written agreement set down between the parties at the point of purchase? Is there any formal agreement for a split-up with a profit or a split-up with a loss?

tododo

I dont believe so no

I dont think she had a deed of trust or anything like that

She did mention that she had some written documentation regarding her deposit

How "legal" that document is though I have no clue

Thrugelmir

Suggest your sister speaks to her lender to see if switching the mortgage into her own name is feasible.

tododo

Thanks

Have let her know - just wondering if this will automatically force a re-mortgage now - it all gets messy

opinions4u

Nothing is "forced".

All three parties - relative, estranged partner and lender have to agree what happens next.

If they don't, it gets messy and expensive.

In the meantime, both are jointly liable for the full mortgage payment. If it doesn't get made, both screw their credit files.

It is in the interests of your relative and estranged partner to sort the "business side" of things out amicably and intelligently or solicitors will get much richer and they will get much poorer.

1) Agree how much he is due - if anything (if property value has fallen, does he pay her?)

2) Check if the lender will actually agree to switch the loan in to her name.

There is a common outcome where the lender won't play ball. Then they are both stuck with the joint commitment. In such circumstances it may be worth getting an agreement drawn up to agree how things will be distributed when the property is sold or a new lender can be found who will lend in one name.

CLAPTON

I'm be surprised if there has been any increase in value over the last three years (most house have fallen in price rather than risen)
so I'm not sure why she is 'buying ' him out at all

what was the price of the house when bought?
what is the value now?

Ghostrider

The first thing to remember is that the lender is in the position of control and nothing will happen regards to the mortgage unless they agree. If the lender does not agree to remove him from the mortgage (as is very often the case at the moment in this scenario) then they are both stuck with the current joint mortgage.

If the lender does agree to put the mortgage in her name only, then she can proceed to agree on a settlement figure with him. At this point, the easiest option is to have a proper valuation done (not some snotty estate agent, more likely a surveyor for a true value) and then decide if the property has increasd on decreased in value since the purchase date.

If the value of the property has gone up by say 20% (for arguments sake) and he put £10k deposit or further equity in, then i'd be inclined to offer him a settlement of £10k + 20% = £12k. If the value had decreased by 20% then i'd be looking to offer a settlement of £8k (£10k - 20%).

To be clear, if she put all the deposit in, then his equity contribution is only based on the portion of any repayments to date (minus interest).

If the mortgage was interest only and he put no deposit in, then he should be entitled to nothing whether the value of the house has increased or not.

Hope that helps.

tododo

Ghostrider wrote: »

The first thing to remember is that the lender is in the position of control and nothing will happen regards to the mortgage unless they agree. If the lender does not agree to remove him from the mortgage (as is very often the case at the moment in this scenario) then they are both stuck with the current joint mortgage.

If the lender does agree to put the mortgage in her name only, then she can proceed to agree on a settlement figure with him. At this point, the easiest option is to have a proper valuation done (not some snotty estate agent, more likely a surveyor for a true value) and then decide if the property has increasd on decreased in value since the purchase date.

If the value of the property has gone up by say 20% (for arguments sake) and he put £10k deposit or further equity in, then i'd be inclined to offer him a settlement of £10k + 20% = £12k. If the value had decreased by 20% then i'd be looking to offer a settlement of £8k (£10k - 20%).

To be clear, if she put all the deposit in, then his equity contribution is only based on the portion of any repayments to date (minus interest).

If the mortgage was interest only and he put no deposit in, then he should be entitled to nothing whether the value of the house has increased or not.

Hope that helps.

Brill....thanks all some good info here

For further info the house was bought for around 175K

Hard to judge the value now according to zooplas estimate its gone up but i doubt that very much

Thanks again

tododo

Hi again

Things are not as amicable as they were initially

I have advised my sister that I dont personally think she can afford the mortgage on her own - shes taking about 20k

I have said that she needs to be on like 40K+ to get anywhere close to a mortgage around the 148K mark

I think its close to about £700 a month now and thats on a decent variable rate - obviously this could have potential to increase quite dramatically at some future point

Hes now turned around and stated hes going to default on the mortgage - not sure if thats the right term but anyway - my initial thoughts on that is that is that t sounds stupid - as will screw all credit files and as hes got a 1 bed flat it could possibly affect that too

My questions are really:

Can my sister go on paying mortgage with two names still attached (again sounds ridiculous to me - as he could then claim what shes putting into the mortgage - or can there be some "agreement drawn up")

Also when you remortgage to a new provider they need evidence of your current pay dont they?

Thanks again everyone

[Deleted User]

To hopefully answer (some) of your questions or at least give a personal view:

Ghostriders and opinions4u comments both seem to be on the right lines to me - If he didn't contribute to the deposit, why should he effectively benefit from it now? If there is written documentation regarding the deposit, so much the better.

• A potential lender will need evidence of salary
• 148k loan on a 20k salary? - not a good idea even if she could get one.
• Your sister's issue will be getting her ex off the mortgage - I suggest that she needs a clean break from him.
• Maybe the best option is for the house to be sold and for her to 'start again', hopefully with her 30k deposit ...