Buying out a share of a house in negative equity

Belfast79

I posted this same thing earlier, but want to change the math on it and unfortunatly make it even harder:

I bought a house with a friend for £215,000. I put down a £50,000 deposit, leaving a £165,000 mortgage which we split 50%/50%. There is now £150,000 left on the mortgage.

The house is now worth around £110,000.

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. I believe he will have to give money to buy himself out of the debt we both have.

marliepanda

Link to older thread: https://forums.moneysavingexpert.com/discussion/4011407

What was the agreement when you first signed up? To share any profit you made? You to get your £50grand back and then share whatever else was left?

I still see it as £40k negative equity, shared between you, so 20k to buy you out of the mortgage plus half of any associated fees.

mynameisdave

Buy him out is an odd phrase in this instance because of all the possible arangements the one that should be at the bottom of the list is that you give him any money.

BitterAndTwisted

You bought a property for £215,000 and it's now worth only £110,000?

I know prices have dropped a fair bit in some parts of the country but by nearly 50%? Are you sure about that?

Can you get a mortgage for £150k based on your income alone? There is no buying out to be done here as there's currently no equity in the property

Kynthia

I take it you didn't have a Deed of Trust or Cohabitation Agreement drawn up? Any unmarried couples/friends/family should do this before buying together as it's a big commitment and debt to be tied to without an exit plan.

There is no one right answer. You could argue that if you were going to get more of the equity if it had increased in value, because if your deposit, then you should own more of the negative equity and your friends gives you less than half. If you were getting your deposit back first and then splitting the equity you could argue that the full £40k is owed to you by your friend. Or you can argue as other posters have suggested and split it. Therefore without a legal agreement it's whatever amount you and your friend can agree on.

saverbuyer

BitterAndTwisted wrote: »

You bought a property for £215,000 and it's now worth only £110,000?

I know prices have dropped a fair bit in some parts of the country but by nearly 50%? Are you sure about that?

Can you get a mortgage for £150k based on your income alone? There is no buying out to be done here as there's currently no equity in the property

I take it from the username the OP is from Belfast. Prices in this part of the UK have dropped 60% or more from 2007 and are still dropping. £215,000 to £110,000 would be common rather than unusual. The OP could even be underestimating the negative equity as transaction levels are 35% of the peak amount.