Shared Equity - A way out?

trapped1988

My partner and I bought a new build Barrett house a year and a half ago through shared equity and living with him is unbearable but I can't find an easy way out! We are in negative equity and without doubt paid too much for our house so selling really isn't an option and I believe we can't rent the house out because of the shared equity (please correct me if I'm wrong?).

The other problem is my family put up the 5% deposit for the house and I want to be able to give them it back because they will be so let down that it hasn't worked out.

He has suggested that one of his friends would move in and cover my half of the mortgage which would be great in a perfect world but his friends are all pretty unreliable and I' not sure how I would go about setting up an agreement that they do pay the mortgage, don't wreck the house etc. and don't end up ruining my credit rating?

He has also suggested we could just privately rent the house out through gumtree and Barrett would never know but surely it can't be that simple?

Help please!!!!

Thanks

Fire_Fox

Welcome! It's worth running a search, these issues come up regularly. You likely need consent to lease from the lender and from the owner of rest of the equity to let the property. IMO do not let a friend move in that is unreliable with money, that will end in tears. You can have a lodger agreement but you would have to go through the courts if they didn't pay. NEVER trust someone else to pay your mortgage, YOU collect money for rent and YOU pay it.

You won't be able to give your relatives back 5%, that is gone sorry. You need to check all your paperwork to see what can be done about selling, also speak with your lender to see whether they can convert any negative equity to a regular loan.

kingstreet

As Fire Fox says, you need to ask your mortgage lender about consent to let before you can consider letting the property.

However, you jointly own the whole property and the builder has only a second charge to cover the equity loan. Do you have a copy of the loan agreement? If not, ask your solicitor for a copy. This should state the terms under which you can let the property, or if you need the builder's permission to let.

The rules for shared equity and shared ownership differ slightly as in that case of the latter, you would need the permission of both the lender and the housing association as the bit you don't own is subject to a lease.

trapped1988

Thank you for your advice. What do you recommend I do next then, speak to the lender? Can I do this without him? Ideal situation would be that he takes on the mortgage (he could prob afford to do this where as I can't). If that was the case, bearing in mind that we are in negative equity, would it just be a case of me signing it over to him?

The lawyer who dealt with our house sale is a family friend of his and although I'm sure he would be professional I would rather not go through him but at the same time I can't afford costly fees!

kingstreet

Your options;-

Sell
Let
Removal from deeds/mortgage

Sell;-

Selling in negative equity means making sure the lender/builder will accept your agreed price and the amount you will owe after completion. However, in your situation, your mortgage lender will likely be paid in full and it's Barrett, the second charge holder, which will be left with the shortfall. You are likely to have to agree to a repayment programme before it gives permission for the sale below the loan amount.

You'll also have to find funds to pay selling fees out of your own pocket(s).

Letting;-

If you both own the property and are party to the mortgage, there's nothing to stop either of you asking the lender about its policy on consent to let.

If you can't get a copy of the loan agreement with Barrett to check what it says about letting the property, you could always ask them for their general policy before deciding if you want to take the prospect of letting the property any further. I suggested the solicitor for the copy as it is likely he will have an accessible copy on his file. I'm not suggesting you seek any advice from them.

Removing you from mortgage;-

If you believe your former partner has sufficient income to take on the mortgage alone and the lender and builder will allow it, you can apply for a transfer of equity. This will involve the lender/builder vetting him as it would for a new application. If it agrees, the matter is then passed to a solicitor for your formal removal from the mortgage/deeds.

The usual cost for a transfer of equity is £400 to £600.

The lender/builder may not agree where there is negative equity and your former partner may feel releasing you leaves him responsible for this debt.

You will also have to waive your right to the deposit you contributed via your family gift.

Fire_Fox

trapped1988 wrote: »

Thank you for your advice. What do you recommend I do next then, speak to the lender? Can I do this without him? Ideal situation would be that he takes on the mortgage (he could prob afford to do this where as I can't). If that was the case, bearing in mind that we are in negative equity, would it just be a case of me signing it over to him?

The lawyer who dealt with our house sale is a family friend of his and although I'm sure he would be professional I would rather not go through him but at the same time I can't afford costly fees!

Of course you can speak to the lender without your partner, ask them about consent to lease and about selling with negative equity. IMO write everything down, post back here if you need to. Ditto when you speak to Barrett.

You are not really in a position to be picky about who you do or do not speak to. Solicitors are bound to keep things confidential, and you don't have to say much anyway. Don't the two of you have any money saved at all, not three mortgage payments in case your circumstances change?

trapped1988

Fire_Fox wrote: »

Don't the two of you have any money saved at all, not three mortgage payments in case your circumstances change?

Not a penny! To be honest I am up to my neck in other debts also, I have very little spare money per month and don't know how I'll afford selling fees let alone a loan to pay back negative equity.

I pay £380 per month over and above my share of mortgage and bills to credit cards and loans... someone suggested today I should declare myself bankrupt because I'll never escape these debts otherwise and be able to afford to rent somewhere to stay.

But then again if I do that will anyone let me rent their property?