Jointly owned home with ex-partner in negative equity

homeowneruk

Hi,

I currently have a joint mortgage with an ex whom I split with a year ago. She left me, this wasn't a mutual decision. I have remained in the home and paid the majority of the mortgage payments since then (she contributed some but then subsequently reduced her contributions to nothing via a verbal agreement). I have no problems paying the mortgage and the bills so personal finances aren't an issue.

We bought the house in 2007 and it is now about 12k in negative equity. She now wants off the mortgage so she can move on. An option would be to sell the house and split the debt 50/50.

However, I have decided that I do not wish to sell the house and want to keep it. I applied for a "transfer of equity" to take on the mortgage with a member of my family in the hope that the bank would accept. However, they have stated that I must reduce the mortgage by 28k to bring the mortgage down to 80% LTV. They informed me that it wouldn't matter who I applied with, the LTV would still need to be brought down to 80% LTV, hence a minimum of 28k.

The only other option is for her to remain on the mortgage until the house is in equity and then a) the bank are likely to accept a transfer of equity or b) I can apply for a new mortgage. She is pushing to get off the mortgage as she doesn't want the liability due to her not living in the house and not contributing to the mortgage, so she is unlikely to want to stay on the mortgage any longer.

She reckons she can't rent another place until her name is off the mortgage (at the moment she is at her mums and is desperate to get out), hence why she is wanting off the mortgage. However, that's not really my problem, but thought I'd give you the full picture.

In all honesty, I'm less bothered about have a 14k loan (half the 28k) to pay back than a 6k loan (to pay off the negative equity if the house sold) as at least with the 14k debt it is going towards something rather than into a black hole.

So, my questions are:

1. can I literally give her the two options of either paying half the 28k to essentially buy herself out of the mortgage or remain on the mortgage until we are in a better position and tell her that selling is not an option?

2. Can she get a court order to force the sale, even though the house is in negative equity? (I'm aware this will be an expensive option in terms of solicitors fees etc) There's no reason to need to sell the house, so I'm not sure on what grounds she would be able to force this (btw, the house is already up for sale but for more than it is currently worth)

3. I'm wanting to move in my new partner and her young daughter. Can my ex stop this from happening as she owns half the house, even though she is not living there or contributing to the mortgage?

4. If my ex was to come off the mortgage once back in equity, would she automatically be entitled to half or could I prove that she hasn't contributed an ultimately deduct this from her share of the profit?

Another thought I had is that if this were the other way around and the house was 28k in positive equity, she would be forcing me to buy her out so she could have her 14k, so why wouldn't this be the same the other way around in that she would need to buy herself out of the mortgage by giving me 14k?

I want to keep this as amicable as possible so we can both move on, and I'm not wanting to be awkward in any way. However I do feel that I need to stand my ground on this and tell her that as she decided to walk out on me then she shouldn't be able to decide what happens to the house.

Thanks in advance for any advice.

BitterAndTwisted

You can't remortgage so your only options are to either come up with the £12k in negative equity from savings between you and then sell, bearing in mind that it's going to cost x amount in estate-agent fees (2%?) plus conveyancing or you sit tight and pay down the mortgage until you're out of negative equity.

It's not really a matter of "keeping this as amicable as possible". It's about what choices are open to you.

Now, how you decide who gets what when the time comes to sell when you're not going to make a huge loss is another question entirely!

She signed up to a long-term joint financial commitment with you and just deciding that it no longer suits and being able to walk away without backward glance is not an option and never was.

CLAPTON

the base line ought to be to sell the property and divide the loss equally
so each incur 6k of debt and then be free of each other

it would seem unreasonable to expect her to give you an extra £8k so you can have a smaller mortgage. (this isn't equivalent to dividing a profit equally as you gain here from an 8K smaller mortgage at her expense.)


It would seem that it is in both your interests to have a complete split; do you really want her owning half the house in five years time?

nomoneytoday

Can you get a mortgage elsewhere, using a £6k contribution from your ex for her half of the negative equity plus a contribution from your savings?

Richard_Webster

You have to distinguish between the legal position and practical realities.

Answers to questions:

1. You can offer that choice if you want, but in the long term if she hasn't got £14K I think you may live to regret it. I'll explain below.

2. In theory yes, if she can afford the legal costs and find half the negative equity. If you can't/won't find the other half I'm not sure what use the court order would be. She might end up paying the whole of the negative equity and trying to sue you for your half!

3. In theory she might be able to, but she would have to go to court so as it would cost her a lot, there would belittle point in her trying.

4. You could try to prove she hadn't contributed and try to deduct that from her share - however the cost of proving it could well be more than the amount you would be trying to save!

When in positive equity you need her signature to sell or to transfer to you and then it very much depends who is more keen for the transaction to occur. Within limits the one who is more keen to do it gets the worse deal. The other one says they are not bothered unless they get £x or y% share. It is only when the difference between what one wants and what they could be entitled to under the law is great enough for it to be worth the cost of going to court that the legal position is relevant at all in practice.

Arguments about why one is not entitled to 50% because of various things that happened or were said can occupy a day or two in court and run up 4 or even 5 figure bills.

If you move on with your life but your ex is still a joint owner and a joint borrower then when it does come back into positive equity she will be sat waiting and will want her pound of flesh. As explained she just says "If you want to sell you need my signature, and I'll only give it if you pay me £zz,zzz."

If she is really desperate now she might find the £14K, but it comes down to whether it is worth it to her to find a further £8K just so she can rent somewhere.

If she won't then you have to think very seriously about risking her being awkward in years to come when you do need her signature. She could disappear to somewhere UK credit ratings are not important so she ceases to care about whether or not the mortgage is paid - if you can't find her think about another few thousand to go to court for an order for sale in her absence. So there are arguments for selling and getting her out of your hair if she is prepared to pay £6K negative equity.

GDB2222

You need to think about what is fair. It is fair to ask your ex for half the negative equity. It is not fair to ask her for enough to help put you 20% in positive equity. You might strong arm her into giving you an unfair amount of money, but you run the risk that she refuses. Then, a few years down the road, the boot will be on the other foot, and she may give you the strong arm treatment. Personally, I would just act fairly, but you are obviously still upset about her leaving you, so maybe you are not in a position to do that.

Strapped

If you don't have the £££s to put yourself in a position where you can take on the mortgage then you have no other option but to sell, or to pay all the mortgage (because trust me, she won't contribute) and have her benefit from that once you are out of negative equity (which could be several years). The latter is really messy so personally I'd sell, take the hit and move on.

homeowneruk

Hi guys,

Thanks for your responses, very helpful.

Just to feedback on what a couple of you have said (apologies is any sounds a bit ranty but just sharing my thoughts):

CLAPTON wrote:

it would seem unreasonable to expect her to give you an extra £8k so you can have a smaller mortgage. (this isn't equivalent to dividing a profit equally as you gain here from an 8K smaller mortgage at her expense.)

Would it be unreasonable? She signed up to this commitment and now she has chosen to walk away from it. We are liable 50/50 whether in negative equity or not.

GDB2222 wrote: »

You need to think about what is fair. It is fair to ask your ex for half the negative equity. It is not fair to ask her for enough to help put you 20% in positive equity.

I see what you are saying there.

If this was the other way around though and the house was 28k in positive equity, she would be chasing me to buy her out and give her the 14k and walk away with this in her pocket, so can this not work the other way around? Can't I tell her that she needs to buy herself out of the mortgage if she wants out?

The fact of the matter is, we signed into a long term financial commitment, and she has now chose to walk away in the hope that she can get out of it with minimal cost to her. Some of the replies talk about being fair to her, but if it was her decision to leave, surely she should have to face the consequences rather than walking away scott free?

I don't want to sell the house. I signed up to this commitment and I intend on honouring it. I don't want to sell the house and end up with 6k of debt going into a black hole with nothing to show for it just because she decided to leave.

Strapped wrote:

If you don't have the £££s to put yourself in a position where you can take on the mortgage then you have no other option but to sell, or to pay all the mortgage (because trust me, she won't contribute) and have her benefit from that once you are out of negative equity (which could be several years). The latter is really messy so personally I'd sell, take the hit and move on.

Finances aren't an issue. I can afford the mortgage no problem. The issue is getting the lump sum from her to get her off the mortgage. Therefore, if option 1 isn't viable, then option 2 is for her to just sit tight on the mortgage whilst I pay it until a time when I can afford the lump sum to take her off or apply for a new mortgage altogether.

In all honesty, it wouldn't be the end of the world having to give her half of any profit a few years down the line, the important thing to me is that I would still be on the property ladder, which is my ultimate aim.

CLAPTON

you fail to see the difference between positive equity and negative equity and giving you extra money to reduce your mortgage to 80 % of valuation

I agree she should pay half the negative equity in the same way that she would expect to get half the positive equity if the situation were different

however that's quite different from her paying for the 80% mortgage.

if you want revenge then so beit but that's not an issue for a money board but better on a relationship board.

GDB2222

homeowneruk wrote: »

Would it be unreasonable? She signed up to this commitment and now she has chosen to walk away from it. We are liable 50/50 whether in negative equity or not.

The fact of the matter is, we signed into a long term financial commitment, and she has now chose to walk away in the hope that she can get out of it with minimal cost to her. Some of the replies talk about being fair to her, but if it was her decision to leave, surely she should have to face the consequences rather than walking away scott free?

Really, one way to deal with this is for you to pay an amount equal to the rent for the use of the house into a joint account. The mortgage payments come out of that, and any excess gets shared between you.

You haven't mentioned how much deposit you each put down.

Strapped

homeowneruk wrote: »

Finances aren't an issue. I can afford the mortgage no problem. The issue is getting the lump sum from her to get her off the mortgage. Therefore, if option 1 isn't viable, then option 2 is for her to just sit tight on the mortgage whilst I pay it until a time when I can afford the lump sum to take her off or apply for a new mortgage altogether.

I beg to differ. Finances are an issue, in so much as you are unable to get a mortgage for the amount required. I agree that £6k out of the £12k negative equity is hers.

In all honesty, it wouldn't be the end of the world having to give her half of any profit a few years down the line, the important thing to me is that I would still be on the property ladder, which is my ultimate aim.

And are you happy to be financially linked to her for several more years? For her to own half the property you reside in (which means she can legally enter it)? And you will always have the threat of a forced sale if, eg she goes bankrupt? I'd say £6k was worth it for a "clean break" personally.