Buying out a share in a house in negative equity

Belfast79

I bought a house with a friend (50%/50% split) for £165,000. There is now £150,000 left on the mortgage.

The house is now worth around £110,00.

My friend now wants to move on elsewhere and has asked me to "buy him out"

Im a bit confused with it being in negative equity and still having a big amount left on the mortgage as to who should be paying who what to get 100% of the house into my ownership.

Could anyone advise me on the mathematics of this.

PasturesNew

You can't buy him out. As you say, there's no money - in fact, on paper, he'd owe you money to leave. Even if he had that money, to leave, he couldn't do it as you'd have to take on the whole mortgage yourself.... in effect .... and you'd need to (between you) pay off the negative equity, you'd have to come up with a new 10% deposit, then remortgage the whole.

He has two choices:
a] Wait it out
b] Convince you to sell at the lower price and you both walk away with a loss apiece. Although to do this you'd both most likely need to settle the negative equity in order to complete (aka; get an unsecured loan each for the difference).

So .... looks like [a] it is.

Belfast79

I could afford the mortgage myself and now have savings to put down a new deposit. (On a higher wage since we bought the place)

How much would he owe me to leave the mortgage?

PasturesNew

Belfast79 wrote: »

I could afford the mortgage myself and now have savings to put down a new deposit. (On a higher wage since we bought the place)

How much would he owe me to leave the mortgage?

Finger in the air maths would say half the NE, so half of £150k-£110k - and then half the cost of selling. At some point the property will be sold and at that point there'd be about £3000-3500 in fees for estate agent/solicitor.

So, that'd mean £20k + £1700 (or so). So about £21,700 from his pocket into yours ... would, with a finger to the wind, be about right.

You could take a view of: "If we put it on the market and sold it at £110k, how much would each of us have to take out of our pocket and put on the table to complete" - and that'd be the £40k + selling fees between you ... so half that.