Options After Breakup

Exodi

Good Morning MSE,

My ex and myself purchased a property on 06/19 with a 5 year fixed term. We broke up 6 months later and have continued living together to date - we both now have new partners. This means there is still 4 years left on the fixed term.

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These are the boring math details - my questions could likely be answered without any figures so feel free to skip this if you've just woke up!
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The property was purchased for £290,000  - it's likely worth around the same now (£72,500 deposit (75% LTV)). We have a declaration of trust that essentially adds up all the money we've put into the property (initial deposit + mortgage payments), works that out as a percentage, and then assigns the equity in that way. To help understand this, I've included the rough figures to date - Ex initial deposit £70k + mortgage payments £4k = £74k total contribution V my initial deposit £20k + mortgage payments £12k = £32k total contribution. Ergo at this moment she would be entitled to 69.8% of the equity (with me around 30.2%) or £58k (with me around £24k) of the £82k gross equity at this moment.

To answer the inevitable questions: the reasons the contributions are significantly different to the returns are that around 15k was left over at the start which was used to purchase furniture, pay for materials, tradesman, etc and we must also remember that mortgage payments do not translate 1:1 into equity due to interest. Secondly, in the current declaration of trust, the mortgage payments (and the contribution) are assigned 75% to myself, 25% to my ex - eg I pay 3/4s of the mortgage, she pays a 1/4 but as you can see above this is reflected in my mortgage payments. I currently earn £46.5k gross a year, my ex around £11k. There are early repayment charges if the mortgage is discharged within the fixed term. This is approximately £8k now, £6k in 2021, £4k in 2022 and £2k in 2023 - obviously this diminishes our equity further.

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Boring maths bit over
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So it's not practical that we live together for the next 4 years - especially as we want to move on with our partners but there are some frustrating issues:

- My ex could not afford the mortgage on her own or with her partner - whereas I can. This essentially dictates that I have to stay with the house.
- Her father has previously advised her that she should not move out until she has all of her money back. Regardless of where this figure sits between £58k - £70k+, it's obviously impossible that I could save this sum quickly and would likely coincide with the end of the fixed term (with the difference remortgaged).
- We have agreed in principal that it's likely mutually beneficial if I buy her out (mainly so we don't lose more money to estate agents).
- We have already agreed in principal that it's most practical that furniture stays with the property and that I purchase it off her at a price to be agreed.
- It has been argued by my ex's father that it's not fair that she should have to move out and pay rent while I get to pay a mortgage (as I'm building equity).

I won't go into further detail to save everyone - any clarification needed, let me know.

My questions are:

a) Can you do an equity transfer while in a fixed term mortgage? Eg, if I had all the money to buy her out of her share of the house, would the lender allow the names to be changed on the mortgage while maintaining the current product?
b) There's big question marks around affordability. I expect to save ~£40k by the end of the fixed term, this would likely mean I'd need to remortgage with an additional ~£30k of borrowing.The balance around this time would be around £180k so question is - would the banks give a mortgage of £210k to a sole borrower on £46.5k p/a?
c) One of the ways out of the stalemate could be that I pay half of her rent if she moved out while paying the full mortgage. I'd caveat this that her equity is defined as a specific sum. This would last 4 years until the end of the fixed term in which I expect to buy her out fully. Is this fair or reasonable? It doesn't sit right that I pay half her rent aswell but I can see it from both sides.
d) Is half of half of the furnitures original value reasonable? Assuming she lived in the property for 1.5 years?

I welcome all comments on this - I'm wary of not being unfair while also not doing myself over at the same time!

jackieblack

I can only comment on your first question but yes, I had a transfer of equity while on fixed rate. My mortgage was (and still is) with Nationwide.
It’s possible that other lenders have a different view.

ACG

a) Yes.
b) it is tight, but potentially yes. 
c) Not sure it is a question. Just as a side thought, why not offer to pay a specific amount of rent rather than half. She may decide to go and rent a mansion if your paying half... 
d) No idea. It will probably depend, Ikea furniture is probably generous, Solid wood/Antique furniture probably holds its value better. 

It sounds like you are both being as reasonable as you can be about it all and talking it all through so it sounds like you can come to some sort of agreement that works for you both even if it is not ideal. My mate went through the same thing with his ex, splitting up 6 months after a 5 year fixed rate - It is one of the reasons why I try to avoid 5 year deals for first time buyers. 

Exodi

Thanks both, very helpful input - came to an agreement last night off the back of this