Buying out an ex? Or other options?

SecondStar

Apologies if you’ve read this post elsewhere, it seems to span several boards for relevance!

I’m gathering information right now, in case I need to leave my partner (unmarried, no kids). I live in Northern Ireland, we are both early 30’s.

We are joint tenants on a 1st time bought property we purchased in November 2020 for £115,000. We took out a 3 year fixed rate mortgage at 2.74%, over 35 years. We each put down £8,625.00 to make a 15% deposit, and we split buying fees 50/50. We have £95,371.80 left to pay off.

If we sold the house to a third party, I doubt we’d see any of our deposit or equity back, between early repayment charges, and solicitors fees. I am working on the assumption that we wouldn’t get any cash left from the sale of the house.

We both earn about the same amount (£22,450.00, before tax and deductions), and all our savings have been jointly acquired, and are jointly held. At present, we have £7,400.00 in savings.

To buy the other person out, I think it would cost about £10,000 - the £8,625.00 we each paid of the deposit amount, plus 50% of the very small amount of equity we’ve made in the last 2 years. As you can work out, we only have £3,700.00 each, in cash. I don’t believe that my partner could borrow the money in cash from anyone, and nor can I.

While we each have the same income, my partner would have the option to move back to his parent’s house for free, whereas I am an orphan and have no family nearby. I would also be taking 2 senior pets with me, who have high outgoings in ongoing medication - pet costs for food and medicine are £360.00 per month.

My monthly income is £1,510.00, and my basic expenses (utilities, food, transportation, mobile phone, minimum pet costs) are £911.00, leaving £599.00 for housing.

I obviously couldn’t afford to buy even the smallest property with such a small amount of cash savings - £3,700.00

If I moved into rental housing, I could only afford a max of £550.00 a month, and would be left with £50 or less each month, after bills and basic expenses. Such housing is very thin on the ground, and most will not accept pets. This would also prevent me from saving any substantial amount, either for emergencies, or to buy another property.

If I wanted to buy out my partner, I don’t believe I could afford the repayments on a personal loan of £10,000.00, alongside the mortgage repayments, unless I took it out over more than 5 years.

I had wondered (and was posting here to ask) about a ‘second charge mortgage’? Where I might release £10,000 of equity in the house in order to buy out my partner, and then remortgage in my name only? I understand that mortgage rates are difficult to predict right now, but I’d wanted more opinions on whether this might be more or less viable than a personal loan?


I know that this problem straddles the boards, between house buying/renting/selling, relationships, debt-free wannabe, and budgeting; but hopefully I’ve made this thread relevant enough to this board to get some help here, and I’d really appreciate any input - as you can probably tell, I don’t really have anyone to ask about this sort of thing.

In my position, do you think you’d be more inclined to rent at the lowest cost possible (could maybe get down to £500) whilst knowing you can’t cut your expenses any further, and that utilities will only rise? Or would you be more inclined to pursue either a loan or second charge mortgage, and hope that interest rates come back down?

Or wildcard option - get a £5,000.00 personal loan over 2 years for £220.00 a month, buy a used caravan, and live rent-free on a friend’s drive for 18+ months to save up enough for a £10,000ish deposit on somewhere else? - only half kidding, it’s seeming more and more like the best financial option! (Can’t move into my friend’s house, she already has a roommate, and we have pets which would clash).

Scorpio33

You would only be able to get a secured loan or second charge if there was enough equity in the house, which by the sounds of it, there isn't. Even then, it depends on your income, meaning it may be possible that you won't be able to borrow enough, due to it going from two incomes to one.

Personally, the best way out is to agree between you that one of you stays in the house, and the other one will get their share of the house at some point in the future, when (a) there is enough equity in the house or (b) finances improve to allow one to buy the other out.

SecondStar

Scorpio33 said:

You would only be able to get a secured loan or second charge if there was enough equity in the house, which by the sounds of it, there isn't. Even then, it depends on your income, meaning it may be possible that you won't be able to borrow enough, due to it going from two incomes to one.

Personally, the best way out is to agree between you that one of you stays in the house, and the other one will get their share of the house at some point in the future, when (a) there is enough equity in the house or (b) finances improve to allow one to buy the other out.

Thank you for the reply.

We got our joint mortgage based on 1 income (partner’s) at £22,455.00 before tax, and then I got my job with the same
income; but I appreciate that it may be a different situation now, with rising rates and affordability.

I do not believe that my partner will
leave the house, unless I’m buying him out, or it’s being sold.

Which for me, would then leave either:
continuing to live together as housemates (until November 2023, and then sell when there’s no early repayment change, at least?)

me moving out into rented and him continuing to pay the mortgage (until November 2023, and then sell when there’s no early repayment charge?)

or attempting to borrow from friends/family to see if I can make up the 7k shortfall to buy him out (unlikely).

Are there any viable options that I’m missing?

In an ideal world, I would like to buy my own flat for about 80k, but that would still
involve borrowing or loaning around 7k, and with the current rates it would cost the same as renting.

It seems like the most sensible thing, financially, would be to continue to live as housemates for a year. The next best thing would be that caravan…

[Deleted User]

Could you not stay in the property for a year until you don't have to pay the ERC and then remortgage? That should allow you to raise the finance in a remortgage on your salary alone? (x4.5 your salary is £101,025 so should allow options).

You could utilise your half of the savings perhaps in the meantime as a part payment? 

It looks like all the figures there could add up for either of you to buy the other out, it would just take some juggling. Whether that would work for you from a monthly payment perspective is a different matter.

Is there any chance of your salary increasing / an extra job etc over the next 12 months?

Scorpio33

So basically neither of you can buy the other one out, due to lack of funds. It can't be sold either due to the ERC and the lack of equity.

That only leaves one of you moving out or you both living as housemates until its sold or you can re-mortgage later?

The only potential option is to rent it out possibly? But that would go against your mortgage agreement.

MFWannabe

Are you amicable? You say in case you split up? So have you split or thinking of it? 

Is it an option to still both live in the house until fixed rate is up? Would be easier to sort then as no ERC and you could continue to save? Is it an option to get second job to help you save more between now and then? 

Would he be willing to move to move back to parents and wait for his money? 

When the fixed rate is up you should be able to remortgage in your name and buy him out? 

SecondStar

Deleted_User said:

Could you not stay in the property for a year until you don't have to pay the ERC and then remortgage? That should allow you to raise the finance in a remortgage on your salary alone? (x4.5 your salary is £101,025 so should allow options).

You could utilise your half of the savings perhaps in the meantime as a part payment? 

It looks like all the figures there could add up for either of you to buy the other out, it would just take some juggling. Whether that would work for you from a monthly payment perspective is a different matter.

Is there any chance of your salary increasing / an extra job etc over the next 12 months?

By ‘part payment’, do you mean paying him £3.7k/£10k to have him move out now, and then paying him the rest when remortgaging next year?

I’ve just passed my 6 month probation at AO level in the civil service, so there may be chance of a promotion within the year, but couldn’t count on it. Could look for Saturday work, alongside my job.

SecondStar

Scorpio33 said:

So basically neither of you can buy the other one out, due to lack of funds. It can't be sold either due to the ERC and the lack of equity.

That only leaves one of you moving out or you both living as housemates until its sold or you can re-mortgage later?

The only potential option is to rent it out possibly? But that would go against your mortgage agreement.

It’s starting to seem that way…

I don’t believe he would move out, unless I was buying him out. I don’t know if he would prefer to live as housemates, or to choose to move out to his parents.

I wouldn’t want to live as housemates, if it could be helped.

I would prefer to either borrow the shortfall and buy somewhere small by myself (probably impossible, given current rates), or to rent somewhere on my own. In either case, he would stay in the house and pay all the bills for the year, and then either sell when the fixed rate is up, or he could buy me out.

Does that sound reasonable?

SecondStar

MFWannabe said:

Are you amicable? You say in case you split up? So have you split or thinking of it? 

Is it an option to still both live in the house until fixed rate is up? Would be easier to sort then as no ERC and you could continue to save? Is it an option to get second job to help you save more between now and then? 

Would he be willing to move to move back to parents and wait for his money? 

When the fixed rate is up you should be able to remortgage in your name and buy him out? 

Without going into too much detail, his recent behaviour towards me is making me doubt whether I want to be in a relationship with him anymore. 

I don’t think I could live with him as a housemate, or at least not for a year.

I don’t believe he would move back to his parents, unless I was buying him out. I don’t know whether he would rather live as housemates, or live with his parents.

I could look for a Saturday job alongside my current job.

MFWannabe

SecondStar said:

MFWannabe said:

Are you amicable? You say in case you split up? So have you split or thinking of it? 

Is it an option to still both live in the house until fixed rate is up? Would be easier to sort then as no ERC and you could continue to save? Is it an option to get second job to help you save more between now and then? 

Would he be willing to move to move back to parents and wait for his money? 

When the fixed rate is up you should be able to remortgage in your name and buy him out? 

Without going into too much detail, his recent behaviour towards me is making me doubt whether I want to be in a relationship with him anymore. 

I don’t think I could live with him as a housemate, or at least not for a year.

I don’t believe he would move back to his parents, unless I was buying him out. I don’t know whether he would rather live as housemates, or live with his parents.

I could look for a Saturday job alongside my current job.

Oh bless you 
May be worth getting a valuation then and checking how much your ERC is? 

Sell up and have a clean  break x 

smipsy

From the sounds of it, you really can only afford to stay in the house, with or without him.

Whether he stays in the house is equally his problem as much as it is yours. You both own the house.