Buying ex partner out of Joint Share Mortgage - Sanity Check Pls!

TheAbidingDude

Hi MSE forums,

I’m currently going through a particularly messy breakup with my ex partner (not married) and we’re in the throes of settling a buyout for a property we bought as joint owners, with her taking 60% and me 40% at the time.

My question is around the buyout figure, essentially I want to ensure I’m not being played unfairly.

The formula she’s applying is as follows:

Valuation - remaining mortgage, divided pro-rata 60/40.

Valuation (based on 3 EAs) = £375 - 400k
Remaining mortgage = £319.507.70

She put in a deposit at the time of £26k together with my deposit of £10k.

To complicate matters, we had various pieces of work carried out on the house over a 3 month period: plastering, rewiring and flooring. The total for these works comes to £6203.46. All of these expenses were paid for using my ex partner’s credit card, with me transferring money to her at the end of each month. There is still some outstanding that I need to repay her (I ceased payments whilst we are negotiating the house buyout as I am not aware currently of all the costs it may incur). She is now trying to claim interest on this money whereas I claim, as an informal arrangement between two partners at the time, there was no interest rate specified and I should not be held to one now.


She is demanding a buyout sum based on a £390k valuation. We bought the property back in March of this year for £360k, and similar properties on the same road go for ~£360 - £380k.

We managed to secure our property for £360k (it was on the market at £380 - 400k) due to the survey highlighting several serious issues, namely the wiring being ancient and the roof / loft area needing repairs / replacement soon.

We took care of the wiring straight away, but the roof and loft still need attention. Because of this I feel the property won’t shift at the valuation she’s basing her figures on.

My question then is threefold:

- Is the formula correct? Value minus remaining mortgage, divided pro-rata?
- Am I right to take into consideration the outstanding work required to the roof and loft?
- Am I right to refuse any interest payments she is claiming on shared expenses?

I’ve read a bunch of threads here from similar posters so apologies if this is going over old ground, I’m not particularly savvy with figures so just want some impartial advice re. the above.

Thanks for reading and for any help, much appreciated.

AndyBSG

The EA's have valued it at 375-400 so i'd say the simplest thing is to meet in the middle of those valuations, i.e. 387,500.

As for the interest, unless you had a formal loan agreement and was always going to pay back more than was borrowed then your ex is living in cloud cuckoo land.

So, the equity that is currently in the house based on that figure would be 67,992.30 which is derived from 387,500 minus 319,507.70.

The work to the loft and roof is irrelevant, unless it's something that would flag in a survey as urgent work then it's not something that'll affect the value.

So, 67,992.30 split 60/40 would work out at £27,196 and £40,792.

You say that you have a 60/40 split but the initial deposit does not work out at a 40/60 split, it's closer to a 30/70 split?

Obviously there are fees involved in selling a property so you could point this out but personally i'd say a 35-40K payout is fair PLUS half of whatever is still outstanding from the building work that was carried out.

Failing that, you could always tell her you're happy to stay put and not buy her out and let her go through the lengthy and expensive process of trying to force a sale while she is still named on the mortgage making her liable for repayments and unable to get another mortgage but it all depends on how much you want play hardball and whether she'll call your bluff and play it back.

There's a fine line between not getting ripped off or feeling you've been walked over and compromising so you can both get on with your lives before being dragged into a war that'll cause you both nothing but aggravation for a few extra pennies.

TheAbidingDude

Thanks Andy, that’s very helpful.

Re. the deposit, yeah that wasn’t 60/40 but she decided that the mortgage itself would be shared 60/40, even though I put less deposit in.

Re. fees for selling, are you referring to fees associated with me buying her out and putting another person on the mortgage (I’m adding my brother to the mortgage)? I didn’t think there would be fees for this but if there are I will ask her to pay half.

Tom99

[FONT=Verdana, sans-serif]I terms of the deposit you contributed 27.8% (10/36) and your partner 72.2% (26/36) so who came up with 60/40?

[/FONT] [FONT=Verdana, sans-serif]Most of the 68k equity in the house has been created by the mortgage not the deposit so it is how you split the mortgage that matters more so than the deposit. If you split the mortgage 50/50 then after you account for your unequal deposit you may come back to nearer the 60/40 split.[/FONT]

Pixie5740

Is there a declaration of trust that spells out who gets what in the event of the relationship breakdown? If yes then that's what you need to base the split on, if not then the starting point is 50/50.

If you want a valuation then get one from a RICS surveyor. Estate agents have been known to over egg the pudding.

bowlhead99

Hmm, where to start!

Firstly it depends on whatever you agreed up front in a deed of trust that you presumably signed when you bought the property together (as tenants in common with unequal shares?)

For a start, you said you bought it 60:40 but she put in £26k and you put in £10k (which would be 26/36ths of it and 10/36ths of it respectively, closer to 70/30 in her favour). Were the ongoing payments of mortgage principal also 60:40, or some other measure - for example deposits 70:30 but monthly mortgage and maintenance and improvements 50:50, averaging out to a 60:40 ownership stake over time. Given it has only been 9 months you probably have the figures to work out if 60:40 ownership of the equity is fair, if you didn't specifically agree that ratio up front in a deed of trust or some other method.

If she paid more than the 60% of initial costs tying up proportionally more of her money on the property than you to allow you to both get the place, then you might feel is appropriate to give her the benefit of the doubt if her payments ended up slightly lower than 60% in the end and she wants 60% of the equity (though you haven't said they were).

Is the formula correct? Value minus remaining mortgage, divided pro-rata?

If you were to sell the house, after the mortgage is cleared and any other selling costs (legal, estate agency) then the remaining amount of money would be split between you based on how much of the property you each "owned". So that seems fine as a concept. If you are happy with what percentage you each own, it's just a case of fairly determining the value of the entire property.

The agencies say 375-400. That doesn't point me to 390 as being the fair amount, unless it was two at 400 and one at 375 (in which case you could discard the highest and lowest two estimates and still be left with £400k as the answer, in which case £390 seems fine.

However, estate agents always want to tell the client that property is worth a lot of money, especially when they are not even going to have to sell it because one person is buying out the other and you are just wasting their time trying to fish for a value. Are those the prices they genuinely expect you to receive, or the asking price (ie "we think you could get 400k so would suggest you advertise £425 and end up accepting a buyer's offer about 6% lower at £400k")?

You should only be deeming the property to be worth what it's "worth" not what an agent will tell you they hope to achieve. If the two of you have different views on a valuation you could consider paying for a RICS surveyor to give you an independent opinion.

- Am I right to take into consideration the outstanding work required to the roof and loft?

Presumably any reasonable buyer would take all necessary work into account. However you are not trying to buy a new build with a perfect roof. You are buying an existing property with known issues, although presumably the roof is not actually falling in this week and may be considered somewhat 'optional' or a 'nice to have'. But the estate agents and surveyor should take the existing condition into account when coming up with the idea that the market value is £375k or £400k or £360k or £425k.

As a side note, if she owns 60% of £390k of house it will cost you a couple of thousand of stamp duty to buy her out (your consideration for the purchase being £x cash and £y mortgage taken over). Legally that cost is yours if you're the one doing the buying and she's doing the selling. But given that coming up with the money yourself is saving the both of you a few grand of estate agent costs, you might be able to negotiate with her to share that cost in terms of paying a lower price to buy her out.

Am I right to refuse any interest payments she is claiming on shared expenses

Pay off the shared expenses now. You didn't agree an interest rate but agreed to pay on time. Of course there was no 'credit agreement' or interest rate agreed between the two of you, because there was no expectation you'd take months to pay. A nominal few percent in line with what you'd pay on a credit card with uncleared balance, would seem fair.

We don't know the detail of this messy split, but it is morally dubious to say "well, no point paying what I owe because there will be some selling expenses later as well". If you pay off your share of those agreed costs now, with some nominal amount of interest then you can approach the remaining costs fairly and without anger and suspicion and frustration on both side.

getmore4less

TheAbidingDude wrote: »

Hi MSE forums,

I’m currently going through a particularly messy breakup with my ex partner (not married) and we’re in the throes of settling a buyout for a property we bought as joint owners, with her taking 60% and me 40% at the time.

on what basis was that worked out doposit/share of mortgage and what was documented?

My question is around the buyout figure, essentially I want to ensure I’m not being played unfairly.

The formula she’s applying is as follows:

Valuation - remaining mortgage, divided pro-rata 60/40.

Valuation (based on 3 EAs) = £375 - 400k
Remaining mortgage = £319.507.70

She put in a deposit at the time of £26k together with my deposit of £10k.

if you paid the mortgage equally proper equity should have been on deposit + 1/2 the mortgage

If that was £360k - £36k deposit as you say later the split should have been £172:£188 or 47.8%:52.2%

To complicate matters, we had various pieces of work carried out on the house over a 3 month period: plastering, rewiring and flooring. The total for these works comes to £6203.46. All of these expenses were paid for using my ex partner’s credit card, with me transferring money to her at the end of each month. There is still some outstanding that I need to repay her (I ceased payments whilst we are negotiating the house buyout as I am not aware currently of all the costs it may incur). She is now trying to claim interest on this money whereas I claim, as an informal arrangement between two partners at the time, there was no interest rate specified and I should not be held to one now.

there are a couple of ways to do this properly but they won't make a big difference. since it is the other bits are so much bigger the simple way is to treat it as part of the purchase costs and split the amounts you each paid, the other way is to count it at the sale

She is demanding a buyout sum based on a £390k valuation. We bought the property back in March of this year for £360k, and similar properties on the same road go for ~£360 - £380k.

We managed to secure our property for £360k (it was on the market at £380 - 400k) due to the survey highlighting several serious issues, namely the wiring being ancient and the roof / loft area needing repairs / replacement soon.

We took care of the wiring straight away, but the roof and loft still need attention. Because of this I feel the property won’t shift at the valuation she’s basing her figures on.

My question then is threefold:

- Is the formula correct? Value minus remaining mortgage, divided pro-rata?
- Am I right to take into consideration the outstanding work required to the roof and loft?
- Am I right to refuse any interest payments she is claiming on shared expenses?

I’ve read a bunch of threads here from similar posters so apologies if this is going over old ground, I’m not particularly savvy with figures so just want some impartial advice re. the above.

Thanks for reading and for any help, much appreciated.

with only £4k gone off the mortgage this has not been going on long and the differences in value and relative equity are small.
you will end up quibbling over a small amount


Don't forget all the purchase costs those need factoring into the equity at the start.

lets got with 60:40 outstanding mortgage £320k value £390

60:40 on £70k is £42k:£28k you are each in for £29k and £13k anyway.

on proper equity less 1/2 the mortgage 52.2% - £160k is £43600:£26400

The other ways are get deposit back then split
adding in the £3k each for the work
£70k-£42k = £28k £14k each on 50:50 or £16.8k on 60:40

That would give the OH £43k or £45.8k


Assuming I got those right that makes the current deal fairly good if you can nail it down a bit.


Most important what does your agreement say

getmore4less

bowlhead99 wrote: »

Hmm, where to start!

Firstly it depends on whatever you agreed up front in a deed of trust that you presumably signed when you bought the property together (as tenants in common with unequal shares?)

For a start, you said you bought it 60:40 but she put in £26k and you put in £10k (which would be 26/36ths of it and 10/36ths of it respectively, closer to 70/30 in her favour). Were the ongoing payments of mortgage principal also 60:40, or some other measure - for example deposits 70:30 but monthly mortgage and maintenance and improvements 50:50, averaging out to a 60:40 ownership stake over time. Given it has only been 9 months you probably have the figures to work out if 60:40 ownership of the equity is fair, if you didn't specifically agree that ratio up front in a deed of trust or some other method.

If she paid more than the 60% of initial costs tying up proportionally more of her money on the property than you to allow you to both get the place, then you might feel is appropriate to give her the benefit of the doubt if her payments ended up slightly lower than 60% in the end and she wants 60% of the equity (though you haven't said they were).............

that's not how proper equity shares work.

you own your cash input + the debt you service as that has bought a share of the property.

what needs clarifying is what % of the mortgage each paid

TheAbidingDude

Thanks again for everyone’s responses here, it’s a big help.

To answer a few queries (apologies for not quoting directly / formatting)

“I terms of the deposit you contributed 27.8% (10/36) and your partner 72.2% (26/36) so who came up with 60/40?”

This was my ex partner who suggested the 60/40 split.

“Is there a declaration of trust that spells out who gets what in the event of the relationship breakdown?”

I’m not sure, but I don’t think so.

The mortgage repayments have been 50/50 every month.

The EA valuations were three separate figures:

375 - 400
380 - 400
380 - 400


“Pay off the shared expenses now. You didn't agree an interest rate but agreed to pay on time.”

For repayment of shared costs, the only agreement was that I would pay what I could afford at the end of each month; there was no hard and fast deadline for full repayment.

I had been doing this for over a year (new items added, new ones paid off etc etc). I ceased making these payments on advice from others whilst the house matter remains to be settled, which I think is a fair course of action? I have said to my ex that once we have agreed on a buyout figure, I will start paying her back the remainder, aiming for £1k per month, with a minimum of £800 per month. In short, I’ve historically always paid any debt each month, and have outlined a fair (imo) proposal to continue payments once, crucially, we have an agreement on the house. Am I being unreasonable here?

“on what basis was that worked out doposit/share of mortgage and what was documented?”

Was her idea, she has all the documents.

I'm thinking a RICS surveyor may be a good shout at this point, although I doubt she would be willing to share the cost and I also guess it could come back to bite me, if the survey is positive.

Urgh, what a mess. Part of me just wants to throw money at her to be done with it.

getmore4less

TheAbidingDude wrote: »

Urgh, what a mess. Part of me just wants to throw money at her to be done with it.

probably worth clarifying who is buying out the other person? I assumed it was you buying her out and re reading that seems to be the case.

I need another look at the numbers and a full time line but I think the range of numbers won't be that wide of what is fair anyway unless there is some ridiculous interest rate on the interim expenses.

There is a fall back if you really don't like the high valuation

You get them to buy you out.

TheAbidingDude

Yup, it's me buying her out.

I'm not interested in her buying me out tbh, we bought this house because of the location and I very much want to keep it!