Mortgage Problems w/ failed relationship

Labinopper

Just wondering as me and my partner have recently split up, leaving us with a mortgage, however at the moment I find myself financially dependant upon her, as she now lives with her parents, but I have nowhere else to go, and she is happy for me to stay in the flat for now. My worry is that I need to sort something out, as at the moment she is still paying a considerable amount of money to keep me with a roof over my head, however I don't want to be relying on her money, but I can't quite afford the bills on my own. I am wondering whether there is anything I can do to cut things back to make things easier.

my mortgage is with Santander and we are 1 year into a 2 year fixed rate, and have a ridiculously high opt out fee, and I am considering changing it from repayment, to interest only to save abit of money, but my repayment is only £400 a month as our mortgage was only £100,000 over 35 years so I don't know whether it would save me much or not really anything.

My other question is whether there is anybody I can speak to to get some financial help? as I literally have nowhere to go back to, and have been living with my partner now for 18 months (not long I know, but long enough for my parents to have sold their place and gotten a one bedroom bungalow)

I am considering the usual methods of saving some money, by cutting the TV/Phone/Internet right down to bear minimum and cutting back on food costs, also considering having a lodger in, however my 2nd bedroom is very small, its approximately 4.5 ft by 6.5ft so its big enough for a bed and thats about it, so I don't think I could really let it out.

The other method we are considering mutually is letting the property out, however we are unsure whether our mortgage company (Santander) will allow us to, as we only put down a 25% deposit, and I understand a Buy-to-let is a minimum of 45% deposit, I was hoping that as the circumstances are as they are, and we have lived there for such a period of time, that they would be happy with us letting the property out on a long term basis, so that atleast we are still on the property ladder, as neither of us want to lose our place on the ladder.

I hope that all makes sense and is clear enough, my mind is somewhat befuddled recently. Any further questions feel free to ask.

Cheers,
Andy.

Thrugelmir

Does your ex partner want "out" of the mortgage immediately ?

Labinopper

Thrugelmir wrote: »

Does your ex partner want "out" of the mortgage immediately ?

well, there is the problem, her parents put down the deposit (£33,000) on the flat, but as a Gift to us, so legally speaking, they have no ties to the flat, but morally spekaing, they own the majority of it, as in the past year we've obviously paid off very little of it, so I have no way to buy her out of the mortgage, short of suddenly finding £35,000, while for her to buy me out would be less than £2,000, but I would hate to lose my place on the property ladder, especially after all the sacrifices we've both made for the flat, and all the money invested in things like fees for moving in and all the furniture

Thrugelmir

Was the gift documented? i.e. was a declaration of trust drawn up.

themull1

why dont you go into the second bedroom and rent the bigger bedroom out?

holly_hobby

Well, ideally you would sell up and move to somewhere you can live comfortably within your means - unless your current financial issues will only be short term and likely to improve in the near to medium term.

Changing to interest only, based on your post, this isn't an option - unless you want to approach your lender stating that you having affordability issues - but in doing so they will only allow IO for a defined period, and want a plan of action from you regarding how you will manage yourself out of the finanical downturn you find yourself in.

Moving out and letting until you are in a more financially secure situ to afford the mge and additional costing, buying out ex etc. As you already live in the property, you would seek consent to let from your lender (advantage is no further deposit). They will consider this (usually 12 - 36 mths before requiring a mandatory move to a BTL mge either with them or an alternative provider).

CTL, the lender may well leave you on your current deal, but they may/probably apply a loading (as this will essentially now be a semi-commerical mge), they will probably charge an admin fee, and may want to see a tenancy agreement and confirmation that the letting is being managed by an ARLA letting agt.

This may give you the breathing space you need, but being a landlord can be a right royal headache, and of course your lender may refuse your application for CTL - of which if they do, you would need to move to a BTL mge with a BTL lender with a max ltv of 75% as a first time landlord (other criteria applies re income and rental income too, but we'll leave that for the mo).

Finally, if you want to say/cant get CTL - you could rent a room (YOU move into the box room, and let your roomie have the master b.room). Under the gov, Rent a Room scheme, you are permitted to receive income of up to £4,250 without tax liability too.

Cutting costs, well there are loads of tips on the debt free broad - take a peak.

Sounds obvious, have you considered looking for a job/position with a higher salary - so obvious I assume you have, but just want to mention it to top and tail the post.

Hope this helps

Holly

Labinopper

Thrugelmir wrote: »

Was the gift documented? i.e. was a declaration of trust drawn up.

No, if I remember rightly they wanted the mortgage to be ours and to have no ties to it themselves

holly_hobby wrote:

Well, ideally you would sell up and move to somewhere you can live comfortably within your means - unless your current financial issues will only be short term and likely to improve in the near to medium term.

The trouble with that is that if we sell, we lose out, the property hasn't gained anything in the year that we've been here, if anything because we're partway through rebuilding the garden, its lost value, so if we sell we lose out on all our fees and everything (I haven't got a clue how much but expect it to be in the region of £10,000? thats for estate agent fees, solicitor fees, our mortgage has an early cancellation charge of I think just under £4,000 aswell)

holly_hobby wrote:

Sounds obvious, have you considered looking for a job/position with a higher salary - so obvious I assume you have, but just want to mention it to top and tail the post.

I am hoping to speak to my boss in regards to my financial situation and hopefully increase my hours and wage to something more stable, but as with bosses, its not his obligation so he could easily refuse.

In regards to the rest of what you said holly, I may well look into the CTL option if I can, it does seem the best route from what I understand, and we do intend on having a management company in to let it out anyway so that we don't have to do all the legwork ourselves.

I am under the impression though that a CTL will mean we have to pay Capital Gains Tax of 18%? If we do would that be only on profits, or would that be on everything? as obviously what we make in rent, would go towards the mortgage, anything extra would be put to one side and either be spent on repairs etc.. or put back into the mortgage as an overpayment, so essentially we wouldn't personally be making money, whilst I know that we'd still be classed as gaining? or something, I dunno, this whole thing is really confusing for me, haha.

grey_gym_sock

i realise it's unavoidable in the short term, but do you want to be tied into a joint property investment with your former partner in the longer term?

if not, the options are to sell up, or for 1 of you to buy the other out. since you put in less money, the more obvious option is for your partner to buy you out.

Labinopper

grey_gym_sock wrote: »

i realise it's unavoidable in the short term, but do you want to be tied into a joint property investment with your former partner in the longer term?

if not, the options are to sell up, or for 1 of you to buy the other out. since you put in less money, the more obvious option is for your partner to buy you out.

the trouble with that is that I have spent so much money for this place, the fees, the interest on the mortgage, the bills, everything, to get what I own of the property out of this, its like getting a backhander, youknow? I've spent probably £10,000 over the past year on the house and on living here, to get just £1,800 out of it seems like a gigantic waste of everything, and quite frankly, in this day and age, is it worth giving up a mortgage, or doing everything possible to hold onto it? will I ever get another chance, youknow what I mean?

grey_gym_sock

yes, it's a wrench, but if the property is not showing a profit, and you were paid back what you put it (which you might not be ...), you should be pretty happy with that. after all, if you'd hadn't bought this property, you'd presumably have been paying rent for the last year, and have nothing to show for it.

why shouldn't you get another chance? a mortgage is not an asset, especially when you're struggling to pay it.

holly_hobby

Labinopper wrote: »

I am under the impression though that a CTL will mean we have to pay Capital Gains Tax of 18%? If we do would that be only on profits, or would that be on everything? as obviously what we make in rent, would go towards the mortgage, anything extra would be put to one side and either be spent on repairs etc.. or put back into the mortgage as an overpayment, so essentially we wouldn't personally be making money, whilst I know that we'd still be classed as gaining? or something, I dunno, this whole thing is really confusing for me, haha.

CGT is only due on any gain realised on disposal of an asset - so you don't pay it on rental income, you are liable to income tax on your net rental income.

CGT in relation to properties have a few anomolies.

If you dispose of your property (prev your primary residence)within 3 yrs of vacating it - you are no exposed to cgt on any gain realised. (gain being the selling price less the original acquistion price/market value for inherited/gifted property).

If you sell the flat in excess of 3 yrs of vacating it, any gain is exposed to a CGT calc - but there will be various allowances and reliefs applied to it, such as Primary Residence Relief (period it was your main residence + last 36 mths of ownership), lettings relief, annual CGT allowance - so there still may no CGT liability unless you make a stonking great gain !

If let, you have to submitted an annual self assessment to declare the rental income, even if post application of permitted deductions (mge interest, letting and management fees, essential repairs), there is no taxable income at all (ie - no remaining net profit).

Hope this helps

Holly