Removing a name from joint mortgage account?

OnlyMe_08

Thanks for everyone's input thus far, but I'd like some more opinions here. Obviously, I wouldn't want the person coming off financially disadvantaged (I wouldn't want it happening to me), but do we not need to factor in that fact that no rent was paid in the past 10 years?

Sorry, might seem I'm asking stupid / obvious questions, but would like to get it clear in my head.

itsanne

OnlyMe_08 wrote: »

Thanks for everyone's input thus far, but I'd like some more opinions here. Obviously, I wouldn't want the person coming off financially disadvantaged (I wouldn't want it happening to me), but do we not need to factor in that fact that no rent was paid in the past 10 years?

Sorry, might seem I'm asking stupid / obvious questions, but would like to get it clear in my head.

But presumably that person was paying 25% of the mortgage? S/he wouldn't do both!

Mergic

SuperSecretSquirrel wrote: »

Is it not as simple as 25% equity?

= (current value - outstanding mortgage) / number of stakeholders
= (200k - 90k) / 4
= 27.5k

Assuming you all stumped up the same amount as a deposit, made equal payments towards fees etc, and have all made equal repayments throughout, I don't think it needs to be any more complicated than this?

I agree, this makes sense to me. If you all sold up and went your separate ways now then this is what you each would end up with. Assuming you all made equal contributions at the start and throughout your ownership. It would have made sense to have made an agreement at the start, but I guess you didn't do this? Did you talk about this situation? It would make sense that any costs associated with buying them out should be met by them. Perhaps if the rest of you can't afford to buy them out immediately (and they don't need the money immediately), you could come to some kind of repayment agreement, although this might get complicated with your mortgage provider.

OnlyMe_08

Beckyy wrote: »

I would expect the other mortgage holders to buy me out with 25% of the current property value (definitely not just 25% of the equity in it) - so £50,000 if the property is worth £200,000

That is assuming that everybody put an equal amount into the deposit, if not then the amount should be increased/decreased accordingly by the percentage of how much they put towards the deposit originally.

There's a huge difference between 25% of the equity in the property and 25% of the value. I wouldn't say 25% of the equity is a fair deal for the person leaving unless everybody is happy with it.

Can this be right, considering the property is not actually being sold?

What about the remainder of the mortgage balance, which still needs to be met by the three remaining mortgagees?

So, what is the best way to get a current value of our property?

[Deleted User]

Surely the best way to do it would be to get current value on property (you could get 3x local estate agents in/look at similar recently sold prices in your street, or get a proper valuer in) But surely if a new mortgage is sought, the bank would do a valuation for the new mortgage (or does that not happen in existing properties).

Current value - outstanding mortgage/4=what each person is entitled to?

Beckyy

The best way to get current value is to have an estate agent value the property.

I only said that because (personally) if I had been paying 25% of the mortgage and owned 25% of the house I would want to benefit from the rise in value over the 10 years of ownership, but would expect to have to pay the legal fees associated with leaving mortgage/deeds.

It doesn't quite sound so simple though with rent being mentioned etc. so maybe one to all sit down and talk about so that you can come to some agreement?

Hooloovoo

Beckyy wrote: »

I would expect the other mortgage holders to buy me out with 25% of the current property value (definitely not just 25% of the equity in it) - so £50,000 if the property is worth £200,000

Beckyy wrote: »

I only said that because (personally) if I had been paying 25% of the mortgage and owned 25% of the house I would want to benefit from the rise in value over the 10 years of ownership, but would expect to have to pay the legal fees associated with leaving mortgage/deeds.

No, that's not right.

You would only own 25% of the house if the mortgage was paid to completion. If you leave early, then you own a pro-rata amount of the house.

For 10 years of a 25 year mortgage, you would own 10/25 * 25% = 10% equity. You've got to factor in the remaining value owed on the mortgage.

Look at it this way, assume:

Value at purchase £200k
10% deposit £20k, paid equally £5k each.

They all then pay their equal share of the mortgage and any fees.

After just one year, one of them decides to leave. Lets say the house is now valued at £210k.

Are you seriously suggesting that the person leaving should expect to receive a payment of £52.5k after contributing to the mortgage for only one year and a deposit of £5k?

I hope you can see that's clearly ridiculous. The same applies for leaving after ten years, only they have a slightly larger share of the equity.

The answer in post #10 is correct.

itsanne

Hooloovoo wrote: »

No, that's not right.

You would only own 25% of the house if the mortgage was paid to completion. If you leave early, then you own a pro-rata amount of the house.

For 10 years of a 25 year mortgage, you would own 10/25 * 25% = 10% equity. You've got to factor in the remaining value owed on the mortgage.

Look at it this way, assume:

Value at purchase £200k
10% deposit £20k, paid equally £5k each.

They all then pay their equal share of the mortgage and any fees.

After just one year, one of them decides to leave. Lets say the house is now valued at £210k.

Are you seriously suggesting that the person leaving should expect to receive a payment of £52.5k after contributing to the mortgage for only one year and a deposit of £5k?

I hope you can see that's clearly ridiculous. The same applies for leaving after ten years, only they have a slightly larger share of the equity.

The answer in post #10 is correct.

That is a very clear explanation.

I don't understand why the OP has mentioned rent at all.

MEM62

Beckyy wrote: »

I would expect the other mortgage holders to buy me out with 25% of the current property value (definitely not just 25% of the equity in it) - so £50,000 if the property is worth £200,000 Then you would be disappointed.

That is assuming that everybody put an equal amount into the deposit, if not then the amount should be increased/decreased accordingly by the percentage of how much they put towards the deposit originally.

There's a huge difference between 25% of the equity in the property and 25% of the value. I wouldn't say 25% of the equity is a fair deal for the person leaving unless everybody is happy with it. Why should someone give you 25% of the whole property when they only have (own) 25% of the equity. Unless, of course, you are expecting the mortgage company to give you 25% of their interest in the house as well. Good luck with that!

..........

OnlyMe_08

Hello again

Could I present the following scenario, to check if I'm on the right track?

Let's assume the property would be valued at 200K on the market (at this point, bear in mind say 10K of refurbishment works which no one has contributed yet).
Outstanding mortgage balance is 100K. Inital deposit capital of 30k will go back to investor. That leaves 70K (100K equity less initial deposit?). Do we then take away the 10K worth of refurbishment, as without it it may have sold for 10K less (that 190k)?

This leaves 60K bewteen the four - 15K, but as only 10 of 25 years has been 'invested', the leaver is only entitled to 40% of 15K?

Is this correct approach and considered fair & reasonable?