Mortgage and separation advice

samsam89

Hi MSE.

Friend of mine is in a difficult situation and needs some advice.

He and his long term partner have seperated (mutually - although he has since found out she was seeing someone and that was her reason for separating). She is looking to buy him out of his share of the house using her Parents as guarantors.

They have 2 young girls (1 year old twins) and a mortgage of £135k remaining.

The house has been valued at £180-£185k.

He has received an informal offer from his ex Partners parents of £17.5k for his half.

They have stated that estate agent fees and an early redemption charge will apply (EA & 2% - £3,600 & ERC - £7,000).

The whole thing is being dealt with by her father and I believe this is an unacceptable offer. I fail to understand why estate agents are needed as the house is not being sold.

I also wonder about the early redemption fee as his 50% stake is just being taken over by another person.

My friend is in a mindset where he wants to take the £17.5k and put it towards a new house when he can afford one next year.

I’m of the opinion that he should get what’s rightfully 50% his but his former partners family have become quite aggressive and he just wants it done so he can move on and put the money towards a home for his children next year.

Advice would be so welcone!

elsien

Any costs should normally be deducted before the equity is split - I'm presuming the house is owned 50/50 and there's no declaration about deposits etc.

Doesn't really matter what you think though, it's his decision at the end of the day. Maybe he's willing to accept the financial split for his children's sake.

samsam89

elsien wrote: »

Any costs should normally be deducted before the equity is split - I'm presuming the house is owned 50/50 and there's no declaration about deposits etc.

Doesn't really matter what you think though, it's his decision at the end of the day. Maybe he's willing to accept the financial split for his children's sake.

True - although the capital he gets out of the house is an important part of how soon he can buy a new home for the kids.

Slithery

An EA won't be needed, but I believe that the ERC may have to be paid.

It isn't possible for one person to 'take over' another person on a mortgage. What happens is the old mortgage is wound up with a new one being taken out with the new names.

mrschaucer

It's called negotiation. The £17.5K is their first offer. Your friend should now state what HE wants (showing his workings!) and hopefully they can agree to meet somewhere sensible in the middle.

G_M

samsam89 wrote: »

They have 2 young girls (1 year old twins) and a mortgage of £135k remaining.

The house has been valued at £180-£185k. so equity of £45K

He has received an informal offer from his ex Partners parents of £17.5k for his half. ignore

They have stated that estate agent fees and an early redemption charge will apply (EA & 2% - £3,600 & ERC - £7,000).
* No EA fee payable.
* has he contacted the lender to confirm the ERC? If yes, and it really is £7K, then equity remaining is £38K.
* Let's assume legal costs of £1K
Equity = £37K


My friend is in a mindset where he wants to take the £17.5k and put it towards a new house when he can afford one next year.
Half of 37 = £18.5K

but there may be other factors.

If they were married, and looking at a divorce settlement, the courts would take into consideration other factors eg
* who will take over the child maintenance responsibilities, and where will the children live
* what other assets are there eg
* joint/marital savings/investments
* pensions
* etc
As there is no formal divorce proceeding though, it is a matter of negotiation, but aspects like the above should be considered, not just the property in isolation.

HampshireH

As above

17.5k doesn't look far off. What figure had YOU come to when you were advising him as this is really where the points in the original post comes from.

You think he is being hard done by but what did you see him walking away with?

For the sake of a grand (based on the workings above) I'm not surprised he is keen to just get on with it and move on.

Nebulous2

This forum is littered with people who have separated and cannot move on financially because their name is still on a mortgage on the family home. Your friend is lucky that his partner has found a way to get him off. He will also have a commitment to his children going forward, so it isn’t all about what he can get.

Taking the money and moving on appears quite sensible to me. The only caveat I’d say is to make sure any agreement is in writing and any other commitments such as car finance or furniture loans are included in the deal. Best to cut these ties and be left with a single payment for maintenance, rather than paying a car someone else drives and arguing about maintenance / replacement.

hb2

Nebulous2 wrote: »

This forum is littered with people who have separated and cannot move on financially because their name is still on a mortgage on the family home. Your friend is lucky that his partner has found a way to get him off. He will also have a commitment to his children going forward, so it isn’t all about what he can get.

Taking the money and moving on appears quite sensible to me. The only caveat I’d say is to make sure any agreement is in writing and any other commitments such as car finance or furniture loans are included in the deal. Best to cut these ties and be left with a single payment for maintenance, rather than paying a car someone else drives and arguing about maintenance / replacement.

I think I would also prefer to take what was offered and move on with my life (of course, I could feel very differently if actually in this situation!). Otherwise this could turn into a protracted wrangle that ends up with the friend actually getting less - this is certainly possible if lawyers get involved as their bills would wipe out any monetary advantage gained.

Fosterdog

As above the figures don't look too far off if that is the actual early redemption charge, although if it were me I would be looking at how long was left on the current fixed term, if less than a year I'd wait it out and do it all when the ERC no longer applies as £1000 may not be much to quibble over under the circumstances but an additional £3500 could make a big difference to him going forward, if it's more than a year then I'd probably cut my losses just to get the financial separation over with.

He really does need to double check the fee though, £7000 on a £135k mortgage is just under 6% which is very high for a redemption charge, most mainstream lenders have a higher cap of 5% and if it is tiered it could be as low as 1% depending on how long is left of the term.

The fact they are asking for such a high redemption fee and claiming there will be EA costs is clear that they are trying to take full advantage of your friend and get him to not only cover all of the costs involved but also trying to profit from him, they cannot be trusted.

All of this might be irrelevant anyway as she might not even get the mortgage even with her parents as guarantors so he needs a backup plan if that happens, do they sell up completely or could he buy her out instead?

Marvel1

Her Father can butt the F out of it, tell him so.

Your friend and ex should sort it out between themselves.