Re mortgage and renting

G_M

Do not let it out jointly!


Sort out your separation/divorce, and agree how to separate out your finances/property.


Then manage your affairs separately.


So either you get a sole mortgage in your name, buy her share of the flat off her, and let it out yourself, or


sell the flat, split the money, and stick your cash in:
* stock market
* new property
* savings account
* pension contribution (good tax benefits)
* round the world cruise
* whatever

saajan_12

A property is an incredibly illiquid and demanding investment, making joint ownership very dangerous if the two parties' opinions / plans diverge. By that, I mean
- you can't sell / buy half a house on the open market so no exit plan
- Properties need maintaining, each owner can have different opinions on what needs doing or what they can afford.
- what if someone can't afford necessary repairs?
- what if someone can't afford taxes resulting from multiple property ownership?
- what if someone wants to use their capital instead of leaving it tied up

In your case you have no expectation of following a similar path as your ex.. she already wants to buy a new property, may want to upsize as she builds a family.. you have spare capital and are relatively unattached, so could go any direction!

Other issues:
1. You would jointly be liable for the mortgage
2. She would have to pay higher rate Stamp Duty for her purchase - perhaps unfairly if you're the only one resisting a sale of her existing property.
3. If you sell, the mortgage would have to be settled first.. the default would be proceeds split 50/50 unless you agree otherwise. I'd change to Tenants in Common and get a Deed of Trust to specify, say 50% ownership the mortgage is paid out of her share, not split. Even then, if the value falls to 190k, then fairly it should be 95k each, but in reality atleast 5k would come out of your share.
4. What if one of you moves into the property, as you can as owner, denying the other of a share of rental income.
5. What if one of you is managing the rental business and omits one of the LL responsibilities, making you both liable.

Cjb777 wrote: »

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.

The benefits of a BTL are a x% rental yield (annual rent / value) plus a y% property value increase per year (which could be positive or negative). There are associated risks e.g. housing crash, major repairs needed, rental voids, legal costs to exit. However, THERE ARE MANY INVESTMENTS WITH RISKS & REWARDS! You could reinvest to something that has an equal yield but more liquid so you don't need to tie up ex's capital too. Also, partially risk is reduced with other investments because they're easier to sell so you're not tied in ot a loser.

Cjb777

Thank you all again for taking the trouble to reply, I will take some time to digest all this advice.
Kind regards

Mnd

I would also say that I don't think it's a good idea to jointly own this property with your ex. Make a clean break and be done with it. When we split after 20 years, we were able to sort all the financial side out sensibly but I wouldn't have wanted to maintain any joint financial arrangements

[Deleted User]

You have obviously owned the flat for some time, so assume there is quite a considerable increase in value already. Its not really worth all the risks mentioned above purely to get tenants in and hope for a further increase in value. If a tenant trashed the place it could cost many many thousands to sort it out.

Sell it, and decide what you want to do with the money to give you a relatively risk free income. With all the disadvantages to renting (and costs/legal knowledge required to rent), I'd seriously consider this.

clarecooney

Agree with the consensus here.
It seems like a good idea to do this now because everybody is currently behaving well but I cannot stress how easily that can break down and at that point, you cannot depend upon your wife continuing to be reasonable. This kind of thing simply invites trouble and resentment.
Sell the flat and give her her share or buy her out and rent it out by yourself.

Apart from anything else, the last thing a tenant needs is complications regarding who they deal with, especially if the relationship breaks down.

Clean break is best.

Cjb777

Once again, many thanks to all of you for all your responses I really appreciate the time and effort.

Just talking this through and maybe I am going to sound naive here. I am trying to make the best of a bad job. We have been separated for quite a while now but we were married for years and my wife has always been true to her word, I have many instances stored away to back that up yet I realise that there is a possibility with outside pressures etc

Apologies if this sounds ignorant, Is there not some sort of legal agreement maybe like a Tenants in Common and a Deed of Trust to protect my half of the flat in the event of any issues ? ( which I can see from comments on here there is a potential minefield of issues)

I know a family who rent their late Mother and Fathers house and split the rent, they have been doing that for years, they go through an agency. They do not have problems with rent and nothing has been trashed, yet having said that I also know people who have rented properties out and had them damaged so I am aware of that. I guess its down to luck of the draw and whoever you get to look after the letting, again I admit I have no experience of that.

So, if I haven't sent you all to sleep or worn you all out, anymore advice or first hand experiences would be very much appreciated

Kind regards to all of you

Pixie5740

The issue is not owning the property as tenants in common it's your wife wanting to release some of the equity via a mortgage. She will be very hard pushed to find a mortgage lender wanting to grant a BTL mortgage in her sole name when there are two people named on the deeds. The reason being that should your wife default on the mortgage it will be very difficult for them to repossess the property with you also being a legal owner. That leaves your wife talking you into getting a joint mortgage with her. Is that something you really want?

Your wife is moving on with her life, maybe you need to start doing the same. This flat will become an albatross around your neck and you'll be stuck living with your mum.

Cjb777

Thanks very much for all the replies once again, this is clearly a minefield !

xylophone

I'm sure it must be difficult to face the finality of formal divorce but would it not be best for you and your estranged wife to settle matters now? You should see a solicitor?

My inclination would be to sell the flat and let her move on with her share and her life. It does not seem to be a good idea to maintain a financial link as you propose.

You are now living with your mother (presumably contentedly) - if you are over 60, it would seem you are securely housed even should she need to go into a care home.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/do-i-have-to-sell-my-home-to-pay-for-care/

The equity from your share of the flat could be invested to supplement your income when you fully retire?