Joint Mortgage / Negative Equity / Transfer of Equity Solutions

andyquid

Hi, I'll try and keep this verybrief, but if anyone has any advice on my scenario it would be muchappreciated.

I purchased a property with my then girlfriend in October 2007 for £87,000. Thefinance borrowed was 102% split up £82,650 (repayment mortgage) and £6,350(unsecured loan) with Coventry Building Society. The mortgage was a 50/50 jointmortgage.

We split up in February 2010 due to a change of heart on my behalf, since then,we have both gone our separate ways and the property has been rented out. I now have another mortgage with my newgirlfriend and I understand my ex is also living with her new partner and isexpecting a baby in July. The flat isstill being rented out and holds a decent rental value.

Since February 2010, we have bothbeen paying £25 per month equally to cover the costs of renting out theproperty (rent covers the mortgage but not insurances and factors bill etc) sowe have both invested an equal amount into the property to date and things havebeen relatively amicable. We have alsoboth cleared the unsecured loan 50/50 by taking out individual finance.

We have had the property valuedand the current valuation came in at £60,000. So we are approx. £20,000 in negative equity. My ex has stated that she is happy to sellthe property and would be prepared to deal with such a loss. I am not so keen to take on a £10,000 lossand would be more interested in continuing to rent this property until we areback to positive equity and then try to sell or I would also be keen totransfer the title deeds into my name if she would be prepared to pay me hershare of the negative equity.

I received an email from my exthis week to advise me that she “no longer has an interest in the property and iscutting all ties to the property. She will make no further payments towards thecosts of future bills”. Clearly this isan uneducated statement as she can’t cut all ties with the property but in my opinionshe is expecting me to assume responsibility and pay her share of the paymentsto avoid defaulting on the mortgage. Althoughthis amount is only £25 I want to avoid paying any of her share as she willnever pay another penny again if I do.

I have made enquiries about a transfer of equity with Coventry and they haveconfirmed that I would qualify financially to afford the mortgage on abuy-to-let basis.

I would like some advice beforeapproaching my ex with an offer to transfer the deeds into my name. Would I be within my rights to ask her to payme her share of the negative equity based on the current valuation? i.e. Shewould pay me 50% of the negative equity (£10,000) and I would then become thesole owner? My concern is that if she didn’tpay anything then I would be taking responsibility for £20,000 of negative equityand she would walk away without paying a penny.

Many thanks in advance for your help and advice.

Thrugelmir

Your ex appears to forcing the issue, i.e. selling the property. You have no rights as such. So will need to fund shortfall to stop the mortgage falling into arrears.

I note that the mortgage is a repayment. So you both may be accruing an unwanted tax bill. Along with penalties and interest for not declaring the income previously.

Your ex is agreeable to settling her half of the negative equity so seems to a good time to cut your losses and ties, then move on with your life.

No lender will consider a remortgage under the circumstances. As would prefer both existing prties to provide surety for the debt.

StuC75

The deeds can only be changed when the ex is removed from the mortgage.

Not only would She have to pay off half the negative equity, you would likely have to cover the rest AND ALSO put down further *to create equity* (as 100% mortgages dont exist).. with the lender to to allow the property to then be rented out..

Its entirely understandable that the ex wants rid of this now, so will fall to you to either take the £10k+ hit to sell up, or to continue as is with you covering all the extra costs till such a time that it can be sold on... theres a lot of £50 a month that would need to be paid till you reach the £10k that you would be writing off now (e.g. 16 Years give or take!).. so assuming the house is always rented out - you are not getting a bad offer here??

Are you sure its a 50/50 mortgage and not in fact Joint & several,, meaning that your both responsible for it in its entirety..

The most amicable may be to see if Ex is willing to 'freeze' what here interest and therefore liability is at this time (albeit not binding with the mortgage company - but more of a personal agreement?)..

So that IF in the future it was sold for a profit, that any entitlement of hers would first go towards the extra contribution you have since made to keep this going (hence maintin the 50/50 contribution..)..

The tricky side (for her) would be that without her name off the mortgage if it sold for even less that would be still her responsibility..

andyquid

Many thanks for the responses.

To confirm a few points;
Yes we are both 100% liable for the mortgage.
I have spoken with the Coventry and they have advised me that they have a 100% buy-to-let mortgage product, mainly for customers in my situation, that I would be eligible for.

Coventry's suggestion was to wait until our current mortgage deal comes to an end in June 2014. At that point, apply for a transfer of equity and at the same time switch to the buy-to-let product that I would be eligible for.

I understand her desire to sell, I also would like to sell but I wouldnt be able to afford a £10,000 debt as I already have another mortgage on my current house. Hence the reason for looking into the transfer of equity. It would also, hopefully be worthwhile investment in years to come.

I'm conscious that she would be willing to make a £10,000 loss through selling the property. That being the case, my offer would be for her to pay me £10,000 and complete a transfer of equity into my sole name rather than having to sell. Does that sound a reasonable offer?

Thrugelmir

andyquid wrote: »

I have spoken with the Coventry and they have advised me that they have a 100% buy-to-let mortgage product, mainly for customers in my situation, that I would be eligible for.

The LTV of the property is over 100%, even if your ex discharged her liability. So you would still need to find £10k.

andyquid

Thrugelmir wrote: »

The LTV of the property is over 100%, even if your ex discharged her liability. So you would still need to find £10k.

No sorry, Coventry have confirmed that that would not carry out a fresh valuation so as far as they are concerned the value is still £87,000. Unfortunately the only product i would be eligible for would be the 100% buy-to-let mortgage at 5.5% fixed.

tidesendtown

One thing that you could point out to your ex is that she is likely to be liable for more than 10K if you sell now, as there are legal and other fees involved.

If you are doing the transfer of equity then you are paying all legal fees associated with it and her loss is 'only' 10K.

StuC75

if you are left waiting until June 2014 for the current product to end (mortgage company suggestion) - is there Early repayment charge in coming off of the current deal? You are then still dependent upon the lending criteria being the same as it is now! - Market could change and they may not have 100% BTL's then..

if the ex is looking to pay to get out at all costs, then such an equity pay up in the mean time could be used to cover those transfer costs now? just so that not at the whim of the lender??

Thrugelmir

andyquid wrote: »

No sorry, Coventry have confirmed that that would not carry out a fresh valuation so as far as they are concerned the value is still £87,000. Unfortunately the only product i would be eligible for would be the 100% buy-to-let mortgage at 5.5% fixed.

A valuer will visit the property to assess the rental value. So may well be asked to confirm property value at same time.

andyquid

I'm told by Coventry that would not reassess the value of the property.

I will issue a proposal to my ex to see what her thoughts are. Hopefully she will see my proposal in a positive light, I won't hold my breath though!

Am I best to issue this proposal through a solicitor or are email sufficient for now?

neverdespairgirl

Are you sure it's £20k negative equity? You said it was an £82k original repayment mortgage, and therefore, after having had the mortgage since 2007, some capital will have been paid off, surely?