Renting out my share of a property?

MillyMolly01

Hi all,

I'm in a bit of a predicament. As stated in a previous post, I bought a 2 bed house for £133K in 2007 with a friend - we have lived in the property together ever since. I would now like to sell and get a mortgage to move to another area of the city independently. Although my friend would also like to move on, she is concerned about being left with no profit (she plans on renting an unfurnished place if we sell, so wants to raise enough from the sale for a rental deposit and some furniture as most of the furniture in our current house is mine. She would be able to temporarily move back home with her parents to save some cash but I don't think she's too keen on this idea). We currently owe about £126,500 to the building society; if we were to sell, estate agents and legal fees will come to £2,500 approx, meaning we would need to secure a sale price of close to £130K to breakeven, or make a very tiny profit. We've had 4 valuations ranging from £120K - £130K. I think we'll be really lucky to attract an offer of £130K due to stamp duty thresholds, but I'm willing to include all of the furniture, finishings and white goods to make our house a little more attractive to first time buyers and hopefully secure an offer over £125K. The house has recently been decorated throughout, bar one bedroom, and is in pristine condition.

My friend is still umming and ahing about selling. We've agreed to put it on the market for £130K and see what types of offers, if any we receive. However, if the worst happens and nobody offers anywhere near the £130K asking price my friend will resist a sale. I don't really want this to get nasty and go down the forcing a sale in court route, so I have been thinking of alternatives... Would there be anything to stop me retaining my name on the joint mortgage but renting out my room to another individual? Would this hinder me being able to get another mortgage? Would we have to change to a buy-to-let mortgage eventhough the co-owner would still be residing in the property? I guess it's a very complicated way of keeping a friend happy and may be more trouble than it's worth. Hmm...

Thanks in advance for any input!

chewmylegoff

MillyMolly01 wrote: »

Would there be anything to stop me retaining my name on the joint mortgage but renting out my room to another individual? Would this hinder me being able to get another mortgage? Would we have to change to a buy-to-let mortgage eventhough the co-owner would still be residing in the property? I guess it's a very complicated way of keeping a friend happy and may be more trouble than it's worth. Hmm...

Thanks in advance for any input!

you can do this by getting a lodger in to live in the room that you would be vacating. obviously it would be a bit odd to do this without the total agreement of the other owner and letting them have final say over whether the lodger is accepted, as you won't be living there and they will.

i think you would need to tell your insurance company, but mortgage wise, not sure, you will need to consult your mortgage contract and see what it says i suppose. i don't see why you wouldn't be able to stay on the joint mortgage, but they may want to change the terms of your mortgage if you are not living there.

for that reason it may be better to structure this as you moving out and your friend getting a lodger in. may make some kind of a difference i suppose, although if the money is being paid to you then would perhaps render the arrangement contrived and invalid.

G_M

What agreement did you draw up to deal with this scenario (or others) when you went into this joint purchase?

Stick firmly to the terms of that agreement.

jjlandlord

Would there be anything to stop me retaining my name on the joint mortgage but renting out my room to another individual?

You would need the other owner's agreement to do that. Considering that he'll still be living at the property he may not agree...

MillyMolly01

G_M wrote: »

What agreement did you draw up to deal with this scenario (or others) when you went into this joint purchase?

Stick firmly to the terms of that agreement.

Unfortunately no formal agreement was drawn up. In retrospect this was a bad move, you live and learn! I suppose it feels a bit wrong drawing up such a thing with a good friend, a bit like a pre-nup, and to be honest the thought that there would be any complications a few years down the line never crossed my mind. We were silly and have to live with the repercussions.

However, we did have a kind of unwritten agreement that as soon as our 5 year mortgage deal was up then we'd sell and go our seperate ways. Of course, with us buying in 2007 we thought prices would continue to rise and thought we'd make a profit on the property. We were both 1st time buyers and saw it as a step on to the property ladder. Things have not turned out as we thought, but I would still like to go my own way and obtain a mortgage in my own right. B'ah!