Mortgage equity after separation

blameyourelf

Hi, was hoping for some advice/thoughts on my situation.

I separated from my long term partner earlier this year. We bought a flat together about 6 years ago and have contributed equally to the mortgage so far. The flat is currently being rented out. I wanted everything to be as fair as possible, and first offered her the chance to take the flat over and move in, but she didn't want to, so I am now planning to move in later this year as this will be handy for work, and ideally want to buy her out of the mortgage.

We bought the flat just before the crash, so it is now worth less than when we bought it. We have arranged three separate valuations, and based on these - best case scenario the flat is worth £7000 more than the outstanding mortgage amount, worst case scenario it is worth £3000 less (2 of the 3 suggested this). Essentially this means that if we sold the flat now, it is likely that, after fees etc, there would be very little if any profit, and probably negative equity, so that's not really an attractive option. Alternatively I could live in the flat and we both continue to share the mortgage, but from her point of view that wouldn't be ideal for a number of reasons, including wanting to buy her own place I think.

My idea of a fair/generous deal, having read this forum and other websites, was to assume that the flat is worth the upper valuation, in which case the equity amounts to £7000, and rather than split the equity 50:50, give her the full £7000 as a goodwill gesture given the inconvenience of the whole situation. It looks like the mortgage company (Scottish Widows) will allow me to take on the mortgage on my own, with an £160 admin fee, (and possibly an overpayment because of the maximum 90% LTV for their professional mortgages currently). I also believe that it would cost in the region of £700 solicitors fees to have her name removed from the deeds. I had anticipated footing these bills myself. I haven't yet put this to her.

The problem is that in her most recent e-mail she said that she has been advised that as I am not planning on selling the flat in the foreseeable future, in order to take over the mortgage I should return some of what she has invested over the 6 years (around £15000 given that we have paid off about £30000 of the mortgage). This wasn't necessarily a demand, perhaps more a hint of what she's looking for.

My understanding is that historical payments into the mortgage are not really relevant, and that given the current valuation of the flat, I am taking on a considerable risk. I suppose she may be concerned that if I sell the flat in 5-10 years time I might make a profit, but that will be on the basis of having paid in 5-10 years more mortgage and starting out from a position near to negative equity.

Does anyone think that my proposed offer is anything less than fair, or does she have a point about taking the historical payments into account? I suppose by rights I could work with the lower valuation and insist that she pays half of the fees and essentially gets nothing, but I'd rather not do it like that. I want to make sure I'm not being unreasonable before speaking to her!

Thanks, sorry for long post...

Thrugelmir

Historical payments are of no relevance. It's value today that matters. Your offer of £7k sounds reasonable, along with paying any fees associated with remortgaging.

If the property is sold you both loose out.

If you take the mortgage on. Yes, you are in a sense overpaying. However you have no hassle or expense of moving.

Shame more people aren't as pragmatic as you. In what are often difficult circumstances.

dimbo61

If she demands more than the £7000 you are offering I would simply put the property on the market and cut your losses.
Selling costs will then be split between you both.
She can 50% of any profit after paying all the costs and her solicitor

monty-doggy

I think you are brewing very generous. My ex was in a similar situation with his ex. She was convinced he would later sell the property and make a huge profit, so they had a clause through a solicitor that if he sold it within 5 years she would get x amount of any equity raised. Quite rightly, after 5 years it was nothing more to do with her.

Maybe this is something you could consider?

TBagpuss

She is confusing different scenarios. There are situations when historic contributions are relevant, ut this is typically when consiering what proportion of the available equity each person should get - eg if she had contributed £30K and you had contributed £15K then it would be fair for her to have 2/3 of whatever the equity is.

She can't have what isn't there. you own an asset which is worth, AT MOST £7,000. You are offering her 100% of that which is extremely generous.

If she does say she wants £15,000 on the basis that she's paid that in, then turn it around, tell her that you no longer want the flat but that you'll let her have it for £15,000!

Kynthia

She's is taking the mickey! Equity is the selling price less the outstanding mortgage less the selling costs. By rights you should ask the estate agents what they think the property will sell for, not what price to market at, or pay an RICS surveyor to give an official value in order to calculate the equity and then offer her half. You don't necessarily get back what you put in as there's interest on the mortgage loan, buying/selling costs and property price decreases.

I'd write to her explaining the above. Then list the calculations for a fair equity split in detail; the three EA valuations and average them, the mortgage redemption value, the typical EA and solicitor selling fees, divide by two. Say this is what you legally have to provide and what she would get if you sold. Then say you will be moving in and she will continue to be jointly liable on the mortgage and it will continue to affect her chances of getting a mortgage elsewhere. However you are prepared to be generous and offer a final settlement amount so that you can both move on.

urbanmyth

The 'advice' she has been given is over simplified. If she wasn't living there during those almost six years she probably would have been paying rent elsewhere and she wouldn't have got all that money back out after she left. Also, does her 15k calculation include interest or is that the capital only? If so, that's your 7k equity. You are being very generous giving it all to her, and this is why I believe it's important to agree a tenants in common contract before going into a mortgage together.