Re mortgage and renting

Cjb777

Hi,

This Is my first attempt on here so I hope that I am in an appropriate forum, if not I would grateful for any suggestions, links etc and thank you in advance for your patience. I also hope someone may be able to offer some advice on my issue below, for which again I would be very grateful

My wife and I are separated but still married at this point in time, albeit just on paper, we both co own a flat which has estimated value of £270,000 she has had it valued. I paid the mortgage off years ago, so there is no outstanding mortgage. She is still living in the flat but has met someone else. Now she wants to move and has seen a property they want to buy. We are trying to solve this amicably, I am back home with my Mother, so at present I do not want to sell the flat, I would rather rent it out.

Getting a mortgage is not easy and what she proposes is to re mortgage £100,000 of her share in the flat and we rent it out, which in principal I agree with. She is investigating this including potential loopholes and pitfalls for me but I would really appreciate some independent advice on any dangers, and what I might stand to lose. For example on the strength of this £100,000 which is less than half its value could the whole flat be repossessed in the event of her default on the re-mortgage, I just cannot afford to take any unnecessary risks.

Many thanks and kind regards

buggy_boy

Sorry to hear about the separation, I know it can be a hard time... There are a few things you should be aware of for your plan.

- If she is a 40% tax payer then she will have to pay tax on the interest on the mortgage of 20% by 2020 (Read up on section 24)

- Being a landlord is not an armchair investment, there is some serious risks involved, if tenants do not pay rent or trash the place can you/her afford to sort it? There are all sorts of extra regulations that have come in, ignore the papers, the huge gains that were made in the past are highly unlikely to happen in the near future.

-If or when you decide to move out of your Mothers, if you were to buy another property you would have to pay the 3% SDLT even though it would be your main residence.

Pixie5740

Cjb777 wrote: »

Hi,

This Is my first attempt on here so I hope that I am in an appropriate forum, if not I would grateful for any suggestions, links etc and thank you in advance for your patience. I also hope someone may be able to offer some advice on my issue below, for which again I would be very grateful

My wife and I are separated but still married at this point in time, albeit just on paper, we both co own a flat which has estimated value of £270,000 she has had it valued. I paid the mortgage off years ago, so there is no outstanding mortgage. She is still living in the flat but has met someone else. Now she wants to move and has seen a property they want to buy. We are trying to solve this amicably, I am back home with my Mother, so at present I do not want to sell the flat, I would rather rent it out.

Getting a mortgage is not easy and what she proposes is to re mortgage £100,000 of her share in the flat and we rent it out, which in principal I agree with. She is investigating this including potential loopholes and pitfalls for me but I would really appreciate some independent advice on any dangers, and what I might stand to lose. For example on the strength of this £100,000 which is less than half its value could the whole flat be repossessed in the event of her default on the re-mortgage, I just cannot afford to take any unnecessary risks.

Many thanks and kind regards

If you want to carry on jointly owning the property then you will need a joint mortgage with your wife to release the £100k. She can't just mortgage the part of the property she owns.

My advice if you want to keep the flat is to buy your wife out. If you don't have the funds available to do so then raise your own BTL mortgage on the property and have the deeds transferred into your name only. However, I would be careful about entering into such financial arrangements with your wife. Are you planning on getting divorced and getting a clean break financial order?

Why do you want to let the property? Do you envisage yourself moving back in one day? Is it to keep a foot on the so-called property ladder? Do you want to be a landlord?

sal_III

If she has found a new partner and looking to buy a new property with him, I'm afraid you don't have much chance of getting back together.

For the sake of everyone involved get a proper divorce and asset split, before going into any more complicated financial deals. It can only end in tears.

hazyjo

sal_III wrote: »

If she has found a new partner and looking to buy a new property with him, I'm afraid you don't have much chance of getting back together.

For the sake of everyone involved get a proper divorce and asset split, before going into any more complicated financial deals. It can only end in tears.

100% what sal says. Why on earth would you want to own it as an investment with an ex. Lender wouldn't like it either (doubt any future partner you have would either, especially as it might mean you get lumbered with 3% stamp duty). I've been married twice and lived with a couple of others - the thought of still owning something with any of them fills me with horror! Know we're all different, but yes, you are putting yourself at unnecessary risk and it already sounds somewhat messy and unbalanced.


When you say 'albeit just on paper', there's far more to it than that. You are officially still married.

Cjb777

Hi.


Firstly, thanks very much to all who have taken the trouble to offer advice its much appreciated. I am in a situation where I am now in a different more expensive area with my Mother who is in her eighties and I am not young either, I am semi retired and at this point in time I have no plans to leave where I am. My method of thinking - which I realise could well be wrong ! - is that, I would rather have some rent and wait until it suits me/us to sell the house hopefully at a higher price than we would get if we sold now. In the ideal world you would expect house prices to rise, so that is the simple reason. Now obviously there are a lot of things going on in this world, maybe house prices could drop. This is one of the risks. But at this point in time, unless I met someone who could share the cost I am not liable to be able to get a mortgage or afford anywhere nearby.


I hope that doesn't sound to confusing, I am not in an easy situation, this split came after years of marriage.


Many thanks again and kind regards

Cjb777

Hi.


Firstly, thanks very much to all who have taken the trouble to offer advice its much appreciated. I am in a situation where I am now in a different more expensive area with my Mother who is in her eighties and I am not young either, I am semi retired and at this point in time I have no plans to leave where I am. My method of thinking - which I realise could well be wrong ! - is that, I would rather have some rent and wait until it suits me/us to sell the house hopefully at a higher price than we would get if we sold now. In the ideal world you would expect house prices to rise, so that is the simple reason. Now obviously there are a lot of things going on in this world, maybe house prices could drop. This is one of the risks. But at this point in time, unless I met someone who could share the cost I am not liable to be able to get a mortgage or afford anywhere nearby.


I hope that doesn't sound to confusing, I am not in an easy situation, this split came after years of marriage.


Many thanks again and kind regards

tlc678910

Hi,
I feel for you and it must be very tough to let go of the things you had plans for but I think there are very real concerns that you will lose out heavily in the plans you are making with your wife. You are still married and there is nothing to stop her taking 100k now and then trying to get half the property later when it is sold.

In a future financial settlement she won't neccessarily admit "oh - I had that 100k so I need to knock that off the settlement".

If she gets her affairs in order so that her new partner (or any children) inherit her half of the assets they will be due half of the assets - it won't be simple to deduct 100k from her half because of your arrangements.

If the rental income from the flat pays the mortgage and then the profit leftover is split your joint rental income will be paying her mortgage and mortgage interest with her new partner - why would you want to do that? Is it a matter of time before they want an extension and another 50k from your property - treating your property as a cash cow and continuing to drain it.

I'm afraid you would be best to bite the bullet and get a divorce with a proper full financial settlement which will involve selling your property if neither of you can afford to buy the other out. You could invest your money or buy a cheaper rental if you prefer.

While you are at it you should take advice and make sure your assets including the property will go to the persons you choose in the event of your death as without a will your wife will be first in line.

Be strong and get it sorted instead of creating a situation that could get you down for years to come.

Tlc

Edit: in answer to your original question - yes if a joint mortgage is taken against your joint property and your wife doesn't pay it you will end up paying it - otherwise your credit will be trashed, you will get fees and charges and eventually the property will be repossessed. Your wife's 100k of equity in her new property will probably be safe as there is plenty of equity in your property for the bank to get their money back if they had to repossess.

foxy-stoat

+1 for selling it and get a clean break from your Wife.

No point in keeping yourself financially tied to a soon to be Ex Wife.

Have you crunched the numbers for renting it out, is it financially viable with the income tax changes and fees?

Do you have to pay her our £135K (half of the value) or just £100K?

xylophone

Is it time for a divorce and financial settlement?

Will she have a claim on your pension or you on hers?

gingercordial

Being a landlord is a business even if you only have one property and even if it is only supposed to be temporary.

If it was any other kind of business would you be thinking for one second of starting up a new business/partnership/company with your soon-to-be-ex wife, someone you have already split up with? No, you'd be mad to do that. If you could pick any person in the world to start a new business with it would not be your ex-wife, I am sure.

Do not make the mistake of thinking that this is different because it is being a landlord. Going into business with her at this stage is never going to work out well. You would be tied together financially for a very long time. With the emotional baggage you won't even be able to treat this as a pure business deal (you could try, but I guarantee there'll be times where one or both of you will drag the past into it). It really would be best, financially and for both of your mental and emotional health, to close this down now.

You are also going to want to get a divorce sooner or later as she is with someone else now, and having a shared asset that you can't get rid of (as it will have tenants who have rights to stay) will make the separation of assets much more difficult and expensive. The divorce lawyers will love you...

Buy her out or sell up. You will not regret that.