Buying ex-partner out of house without mortgage

ChoPa

Hello

My ex-partner and I are separating (not married, no kids). We have agreed in principle buy him out of the house (valuaton = £425k, remaining mortgage £106k) as he wants to move on quickly (to rent initially, then buy).

I can raise the money to do this with a combination of mortgage (have decision in principal and application in) and my savings. (My savings plus existing mortgage leave a shortfall to pay him the full equity he is owed, hence the extra borrowing on my part)

However, he has now suggested that we could transfer the joint mortgage into my name, then I pay him all my savings, with an agreement drawn up by a solicitor to say that when I eventually do sell the house I will repay him this difference at that point in time. This means I don't have to stretch myself so far now, and he can move on imminently. He doesn't want to retain a share of the house, just know that we have in writing that I owe him this money.

My question is: is this allowed? Will the building society take a dim view of me not paying him an amount of equity that matches the house valuation? Are there any tax/legal implications that I have missed? Sorry, I'm not even sure what questions to ask, I just feel it can;t be so simple!

Thanks in advance of any advice.

Annisele

Your lender won't care about the amount you pay to your ex - that's between the two of you. What your lender might care about is whether your ex takes a charge on your house. And even if your current lender doesn't care (which it might not, lenders vary) it's very likely a future lender would care - so the charge might end up meaning you involve your ex in any remortgaging arrangements.

I suspect we're talking more than a few hundreds here, so I think your ex would be foolish to agree to do this without taking a charge against your house.

As to the tax consequences, that depends. I've no idea about the SDLT implications (if any), but income tax will depend on whether you pay your ex interest on the loan you've made to him. I don't think CGT will be an issue if you've both lived in the property as your main residence for the whole time you've owned it. I can't think of any other tax consequences, but that doesn't mean there aren't any.

A practical consideration might be what sort of time limits you're putting on this. If your ex wants to buy another house, then presumably he's going to want his share of your current house in order to do that. Is there any risk that he'd demand his share of the house at a time that wasn't convenient to you? (Eg you'd just lost your job, or lending criteria had changed such that you weren't able to remortgage to borrow enough to pay him off?).

ChoPa

Thank you for your reply, @Annisele.

It sounds like whether my partner takes a charge against my house is a key issue here, then, so I need to look into this further.

Thanks for pointing out that any interest on the amount I'd owe him may have tax implications, I can look into this too.

A practical consideration might be what sort of time limits you're putting on this. If your ex wants to buy another house, then presumably he's going to want his share of your current house in order to do that. Is there any risk that he'd demand his share of the house at a time that wasn't convenient to you? (Eg you'd just lost your job, or lending criteria had changed such that you weren't able to remortgage to borrow enough to pay him off?).

The time limit is a huge concern. I wouldn't be able to raise that amount quickly if he demanded it was suddenly repaid (and I won't be able to sleep at night in any case while this is a possibility!). I also don't want to put myself in a position where I would be under pressure to ell quickly to pay him back as that defeats the point of staying – I might as well move now to a slightly cheaper property so we have a clean break.

Thanks for your response and giving me food for thought.

MFWannabe

ChoPa said:

Hello

My ex-partner and I are separating (not married, no kids). We have agreed in principle buy him out of the house (valuaton = £425k, remaining mortgage £106k) as he wants to move on quickly (to rent initially, then buy).

I can raise the money to do this with a combination of mortgage (have decision in principal and application in) and my savings. (My savings plus existing mortgage leave a shortfall to pay him the full equity he is owed, hence the extra borrowing on my part)

However, he has now suggested that we could transfer the joint mortgage into my name, then I pay him all my savings, with an agreement drawn up by a solicitor to say that when I eventually do sell the house I will repay him this difference at that point in time. This means I don't have to stretch myself so far now, and he can move on imminently. He doesn't want to retain a share of the house, just know that we have in writing that I owe him this money.

My question is: is this allowed? Will the building society take a dim view of me not paying him an amount of equity that matches the house valuation? Are there any tax/legal implications that I have missed? Sorry, I'm not even sure what questions to ask, I just feel it can;t be so simple!

Thanks in advance of any advice.

Personally I’d buy him out now 
Best to have a clean break and not be sill tied in any way speaking from experience 

Letsgetmoving

Also consider you will be fully responsible for all ongoing maintenance and repairs but when you eventually sell he will be getting the benefit.
if your house increases in value before you sell it benefits him after having no input/contribution

it may be worth it emotionally for you both to move on now but probably not financially