Removing a name from joint mortgage account?

Mergic

The market value should take into consideration the presentation of the house. A tired and dated house that needs a new kitchen and bathroom and redecorating throughout is going to be less desirable, so valued less than one that is presented to a high standard and needs little/no work doing to it. Repairs and structural work required may have a greater impact on price. But, if you're not actually going to sell it then you're never going to know exactly what the sale price would be, you'll just have to get 3 or 4 valuations to give you an idea of the value. They probably will give you a price they would recommend marketing it at and another price they would expect to achieve. If there are lots of similar houses nearby then it will be easier to get a reasonably accurate figure than if it's a unique property.

So £100k outstanding mortgage is the proportion of the house still belonging to the mortgage provider - so deduct this from the value.

£30k deposit - who's contributed this; was it £7.5k each?. If so, then as you say they should get this investment returned as part of the settlement. If not does this 'investor' want a return on their investment? It would make sense that they are entitled to a proportion of the equity as an investor, although this should have been agreed at the time of investment.

The remaining £70k is the equity in the property after 10 years of investment. After 25 years the three remaining investors may have a much larger equity stake as the house could be worth £600k or whatever. Assuming you've all contributed equally at time of purchase and over the last 10 years, the person leaving should be entitled to 25% of the equity, plus their original investment, less costs.

I think you're trying too hard to find a way of paying the leaver less than they are entitled to. If you can't afford to buy them out and you hadn't discussed this at time of purchase, then it's time to have that discussion with them and try to come to an agreement that is manageable for all; perhaps they could maintain their stake as an ongoing investment. If you can afford to buy them out, then accept they have a right to their share of the profit made in a rising market and be satisfied that you will have a 1/3 investment in a property that has proven to be profitable in the last 10 years and hopefully will continue to be in the next 15.

OnlyMe_08

Thanks for your advice Mergic.

Mergic wrote: »

Assuming you've all contributed equally at time of purchase and over the last 10 years, the person leaving should be entitled to 25% of the equity, plus their original investment, less costs.

I take this is the deposit referred to?

Mergic wrote: »

I think you're trying too hard to find a way of paying the leaver less than they are entitled to.

Not at all. I'm actually on a fact-finding mission to determine:

1. How to best approach this
2. what would be fair to all parties involved, so that no one loses out / worse off - including me!

So, for clarity, the 40% (10 of 25 years) of the 25% equity is irrelevant?

BobQ

You seem to be complicating things and not explaining everything despite wanting an opinion on the matter

Is the original investment of £30 from (a) one of the people paying the mortgage; (b) all of the people paying the mortgage on an equal basis; (c) a third party who does not live in the house?

Does the original investor (a) just expect their money back or (b) do they want that plus the capital growth in the property while they invested in it?

What matters is the value of the house when you bought it compared with the value now.

Gastines2

This question just shows how important it is to get scenarios like this agreed and in writing,signed and sealed,at the outset. I was in a similar scheme with 2 family members agreed details but not in writing,result,I did a lot of work and must be the only person to lose money on a Docklands Maisonette.Still,I learnt a lot,expensively!!!

OnlyMe_08

Thanks for your comments BobQ, but I don't think it matters if I am not being as detailed as I should be, as all I want is the principles of tackling the scenario presented.

Lets just say the original deposit is all the third party is interested in.

Mergic

But the details change the scenario. An additional party (in this case it's a 6th party if the deposit has been provided by someone other that the 4 owner occupiers) could change the claim that each and every party has or is willing to have in the future. If nothing is in writing then the deposit provider may want and have a valid claim to some of the equity, reducing the equity for each owner occupier.

Sounds like what you really need to do is sit down with all parties and discuss what each wants from the situation now. Then you can approach the mortgage provider and solicitor and see if you can make arrangements with them to make it happen and be official in writing