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

obay

TheAbidingDude wrote: »

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!

Do you have the required wage to take on the mortgage on your own?

Ie, would you pass affordability comfortably ?

TheAbidingDude

I'm not passing on my own, I'm bringing someone else on in place of her. We've gone through the AIP and have that all set, and are going to the bank ~1 week to get the proper deal done. Should be a formality.

obay

TheAbidingDude wrote: »

I'm not passing on my own, I'm bringing someone else on in place of her. We've gone through the AIP and have that all set, and are going to the bank ~1 week to get the proper deal done. Should be a formality.

I wish you luck -- I wish that you'll have a better life without her.

I wish you good luck.

bowlhead99

getmore4less wrote: »

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

We are talking about the same thing. My observation was basically, is the way you getting to the 60:40 by having her agreeing to put more than 60 of the initial capital and you take on more than 40 of the improvements and mortgage and see what shakes out, with an expectation you will each have eventually funded 60% / 40% of the overall capital payments funded? Otherwise her voluntarily putting in over 70% at the start and 60/40 along the way, means she's funded over 60% but only wants 60% on sale, which would be surprising.

On the mortgage part as far as the lender is concerned they are jointly and severally liable, however there could quite easily be an agreement for one party to pay a greater proportion than the other until the end of the mortgage. Those sort of agreements could quite easily have been made verbally or written at the start (obviously written is more useful). Any solicitor worth their salt will have said at the outset "do you intend this to be anything other than tenants in common with equal shares, if so let's make the deed of trust reflect that so you can both see what you own... Are you *sure* there was no such document within your paperwork back in March?

If she "has all the paperwork", ask to see it. If she says there is no such document just call or email your solicitor/conveyancer from the time (only 6-9 months ago) and ask if their file contains a deed of trust recording the ownership shares proposed.

In post 4 you say

she decided that the mortgage itself would be shared 60/40, even though I put less deposit in.

.

But then you say in post 9,

The mortgage repayments have been 50/50 every month

So, if she had decided per post 4 that the mortgage would be shared 60/40 with her having the lion's share (even though she put in more than 70% of the deposit to help you get the deposit to the required 10% of purchase price)... why did you pay 50% of all the mortgage each month? Or did she not really 'decide that the mortgage would be 60/40' up front, only deciding that now when she is trying to reverse-engineer what she believes to be a fair split?

Another query, you say in post 9 she funds things with her credit card and you pay her back when you can, that's what you've been doing for over a year now. But you've only owned the house since March of this year?. So the reference to payments when you can since a year ago are just in relation to general lifestyle stuff in the past, not to do with the home improvements?
You said

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.

That seems like something of a cop out on your part which won't help keep things smooth sailing while you are trying to negotiate around what to do with the house.

"Hey, you owe me for all this stuff for general living costs or whatever from time to time and also the home improvements and maintenance which I funded and you need to cover!"

"well, I know I owe you for them, and you are out of pocket, and there is a risk that not contributing my fair share to the maintenance and improvements might be seen as not keeping up my responsibility to properly pay the costs for the share of house that I own when I want to make the case that I own a large part of it, but frankly until we know what the house is worth and whether I can afford to buy you out, I don't think I should be responsible for my debts. Also, it's not fair if you charge interest".

As an independent third party I would see you at being wholly unreasonable, which does not help things if you later want to try to make the case that she's the unreasonable one with unreasonable ideas of what you should pay to buy her out.

Part of me just wants to throw money at her to be done with it

Ok, but just curious... you owe her money and have only been paying back what you can afford from time to time ; if you buy her out you will need to stump up tens of thousands in cash to do that; you will also need to convince the mortgage co you can service the £320k mortgage on your own - with an affordability check on whether you could still afford that if the interest rates jumped up to 6%+ and the interest alone was £20k a year on top of the capital repayments. Do you have loads of savings and a kick-arsz salary that allows you to do that?

- *Edit I see you say you will get someone else to help you jointly buy her out.

getmore4less

how proper equity based shares work.

if you buy a house for £200k and one pays £100k cash and the other pays for the £100k mortgage you own 50:50 not 100:0 (even if there is a joint mortgage).

in this case we seem to have have £26K + £10k + mortgage £324k 50:50

The proper equity split is £172:£188 or 47.8%:52.2%

Another way to look at it is the deposits bought £36k worth of the house or 10% they own that 26:10 or 72.2%:27.8%

The mortgage bought 90% of the house and that is owned 50:50.

As it happens the way the OP OH is doing the calc it works in his favour anyway(subject to verification of my previous calculation)

that just leaves the extra work costs and resolving the outstanding split of those and that debt.

A proper time line with some dates and cash flows of the extra costs would help clarify the range of numbers

not clear who paid for all the purchase costs as they need to be included as well, there would be SDLT of £8k + fees probably over £10k to account for.

getmore4less

This is the time line I have pieced together so far.

March purchase £360k £26k + £10k + mortgage £324k 50:50

We have some missing costs here and who/how they were paid.

March-Dec, 3 month subset building work, £6.2k no indication of how that was to be split what has been paid or is outstanding or what interest is being demanded.


Dec. Buy out £390k mortgage £319,500


You then have the buyout costs,these will mount up to a few £k but you save the costs if you sold, there have a been a few threads on this subject and they get quite a wide set of views on how these costs should be split, worth a read thee is a good one from earlier this year maybe someone can find it.


bowlhead99, raises some points that need clarifying on this CC and you paying back as you can.


...................................
previously on the simplified numbers for the ex wants and proper equity I got these 2 answers.
60.0%:40.0% on £70k is £42k:£28k
52.2%:47.8% on equity-mortgage share is £43,600:£26,400

that looks wrong you would expect the 60:40 split to get the higher amount but it is down to the 10% being split 60:40 when it was really 72.2%:27.8%

£39k 60.0%:40.0% is £23,400, £15,600
£39k 72.2%:27.8% is £28,158, £10,842

Then the mortgaged equity 90% net £31k being split 60:40 rather than 50:50
31k 50:50 £15,500 £15,500
31k 60:40 £18,600 £12,400

ex looses(£4758) on the deposit bit and gains(£3100) on the mortgage bit but not enough still down £1,600

if the mortgage had been paid for longer this would have made the numbers move in favour of the ex.

as it stands the OP is doing OK and if they can sort out the side debts it won't be far off fare.


another very simple approach is where has the £70k equity come from, £36k deposits £4k paid of the mortgage and £30k increase in value

if we say the £6k was £3k each and broke even on adding value.

That means they put in £31k and £15k leaving £24k to split

with no increase in value the ex gets min £31k or max £55k if they took 100% of the left over increase.

split 50:50 we are at £43k to buy out.

however you try to crunch the numbers £40k-£45k is coming up


(all needs adjusting for final real numbers)

Tom99

[FONT=Verdana, sans-serif]If the deposit contributions and the mortgage are not paid in the same proportion then the equity split will move over time as the mortgage is repaid.[/FONT]
[FONT=Verdana, sans-serif]For example if party A pays all the deposit and party B Nil then to start with party B will get back 0% of the equity.[/FONT]
[FONT=Verdana, sans-serif]However if down the line £10k has been paid off the mortgage then party B will have a percentage equity that £5k would have bought of the original purchase price.[/FONT]

getmore4less

Tom99 wrote: »

[FONT=Verdana, sans-serif]If the deposit contributions and the mortgage are not paid in the same proportion then the equity split will move over time as the mortgage is repaid.[/FONT]
[FONT=Verdana, sans-serif]For example if party A pays all the deposit and party B Nil then to start with party B will get back 0% of the equity.[/FONT]
[FONT=Verdana, sans-serif]However if down the line £10k has been paid off the mortgage then party B will have a percentage equity that £5k would have bought of the original purchase price.[/FONT]

That is not how proper equity split works.

The debt bought the equity.

if you service that debt you own the equity.

very simple example 2 people buy a house

one of them puts £1 cash the other uses debt and has it interest only.

In your world the person that put the £1 always owns 100% and the other nothing.

look at it another way with these 4 scenario,

2 people buy a house

1.50:50 for cash
I think you agree they own 50:50?

2.turns out that one borrowed the money from his mum,
do they still own 50:50?

3. turns out one borrowed from his mum and secured the loan on the property
do they still own 50:50?

4 turns out one borrowed from a bank and secured against the property
Still 50:50?


As the debt is paid off the equity does not change the debt owed does.

Tom99

getmore4less wrote: »

That is not how proper equity split works.

The debt bought the equity.

if you service that debt you own the equity.

very simple example 2 people buy a house

one of them puts £1 cash the other uses debt and has it interest only.

In your world the person that put the £1 always owns 100% and the other nothing.

look at it another way with these 4 scenario,

2 people buy a house

1.50:50 for cash
I think you agree they own 50:50?

2.turns out that one borrowed the money from his mum,
do they still own 50:50?

3. turns out one borrowed from his mum and secured the loan on the property
do they still own 50:50?

4 turns out one borrowed from a bank and secured against the property
Still 50:50?


As the debt is paid off the equity does not change the debt owed does.

[FONT=Verdana, sans-serif]All your examples show 50/50 so do not illustrate the point I was making.

[/FONT] [FONT=Verdana, sans-serif]By equity I mean the remaining net amount left over after paying off the mortgage and sale costs.

[/FONT] [FONT=Verdana, sans-serif]I did not say it will always be 0%/100% but will move over time as the mortgage is repaid.

[/FONT] [FONT=Verdana, sans-serif]A deed of trust does not simply say A owns x% of house and B owns y% of house, it has to describe how the remainder is split and if deposit/mortgage are not the same contribution %age then the formula will need to accommodate that.

[/FONT] [FONT=Verdana, sans-serif]So using the OP's figures of deposit £10k + deposit £26k + mortgage £324k a deed of trust would say something like this:

[/FONT] [FONT=Verdana, sans-serif]After discharging mortgage and costs of sale the residue is split as follows:[/FONT]

• [FONT=Verdana, sans-serif]2.8% (10/360) of the gross sale proceeds less costs of sale but not mortgage to A.[/FONT]
• [FONT=Verdana, sans-serif]7.2% (26/360) of the gross sale proceeds less costs of sale but not mortgage to B.[/FONT]
• [FONT=Verdana, sans-serif]The remainder to be split 50/50 (if that is how the mortgage was split).[/FONT]

[FONT=Verdana, sans-serif]
As you can see this formula will result is A's share creeping up over time as the mortgage is repaid.[/FONT]

getmore4less

OK get what you were trying to say and amounts to the same thing when you separate the components to the share they each bought.

Needs some additional wording to allow for unequal overpayments.