Buy ex out or split sale?

Dixxy095

I’ve got a pretty good offer to buy my ex out but worry I’ll struggle to afford living costs. 

We purchased our home 2 years ago for £163,000, and have had it valued at between £180,000-£190,000. It’s currently on the market for £190,000. It’s a 3 bed semi, we both put half together for a 5% deposit. The outstanding balance is currently £150,000. My ex wants £10,000 to be taken off the mortgage, we’re on a tracker rate meaning no fees if I was to take her off.

I have met with a mortgage advisor, who has secured me a decision in principle for £160,000. £10,000 to go to my ex, £150,000 for the remaining balance, which would leave potential £20-30,000 equity. This is all quite good. However, it’s a 5 year fixed rate at 6.64%, repayments would be around £962 per month. 

I currently earn £35,000 per year, which is set to rise to £38,000 in the next month or two. From my pay rise I have calculated that all my outgoings would be £1841. Bringing home £2500 after tax, this would leave me with £659 for anything else. Although I am a minimalist, don’t go out drinking etc and barely spend anything, this doesn’t seem enough to me. Part of my payments include a low interest loan for my car and some dental work I had done which I have around £10,000 outstanding to pay over the next 4 years (costs me around £260 per month). 

I am able to sell the property but it would be a split sale 50/50, I’d move back home with my parents and save a lot of money doing so.

Really really unsure what to do, should I make the first option work and potentially get a second job if the budget is tight? (I wouldn’t want a lodger and have nobody I know who would be able to move in). Or should I just sell and move back home with my parents for a bit, giving me some financial freedom and chance to pay £10,000 debt I mentioned?
Thank you 

Bookworm105

is this a property you really, really, really, want to live in, or is it just "convenient" for now?

financially castrating yourself for a place you will leave in few years anyway seems pointless if the alternative is swallow some pride and go back to live with the bank of mum and dad

is part of the motive to deny her getting 15,000 from the equity split rather than 10,000 from the buy out ?
how will you feel living in a place that reminds you what it was like when you were a couple?

clean and total break time?
(I appreciate coming off the property ladder makes it harder to get back on if prices keep rising)

Mark_d

Without the car loan and loan for dental work you would have been fine.  But as it is I feel there would be too much risk.  I suggest moving back with your parents.

Once you have cleared your loans and saved up a good deposit, then  that might be the time to consider getting back on the housing ladder

Dixxy095

Bookworm105 said:

is this a property you really, really, really, want to live in, or is it just "convenient" for now?

financially castrating yourself for a place you will leave in few years anyway seems pointless if the alternative is swallow some pride and go back to live with the bank of mum and dad

is part of the motive to deny her getting 15,000 from the equity split rather than 10,000 from the buy out ?
how will you feel living in a place that reminds you what it was like when you were a couple?

clean and total break time?
(I appreciate coming off the property ladder makes it harder to get back on if prices keep rising)

I think the main thing persuading me to want to buy her out is the fact that she only wants £10,000 which would leave me with more equity in the house than I’d get from selling currently 

jackieblack

Does the £1841 for ‘all my outgoings’ include the £260 loan payment?

I have never in my entire working life had £650 a month left over after all my outgoings and I’ve managed perfectly happily, but everyone is different.

Can you not just do a ‘Transfer of Equity’ with an additional £10k with your current lender, keeping your current %deal, if it’s a better rate than you’re being offered by new lenders.

You know the housing market in your area better than any of us - in this area there is a shortage of smaller homes as local developments have all been huge ‘executive’ homes (bought mainly by people moving out of more expensive areas) and many of the original homes have been extended by their owners, so I would have struggled to find another home I could afford locally if I had sold up when my marriage ended. But if appropriate homes are plentiful in your area it might be more appealing to sell. 

You will save on the estate agent fees and two lots of conveyancing fees if you stay put, (possibly also Stamp Duty?) - maybe worth taking into consideration. 

saajan_12

Dixxy095 said:

Bookworm105 said:

is this a property you really, really, really, want to live in, or is it just "convenient" for now?

financially castrating yourself for a place you will leave in few years anyway seems pointless if the alternative is swallow some pride and go back to live with the bank of mum and dad

is part of the motive to deny her getting 15,000 from the equity split rather than 10,000 from the buy out ?
how will you feel living in a place that reminds you what it was like when you were a couple?

clean and total break time?
(I appreciate coming off the property ladder makes it harder to get back on if prices keep rising)

I think the main thing persuading me to want to buy her out is the fact that she only wants £10,000 which would leave me with more equity in the house than I’d get from selling currently 

Well what's the rationale for her only wanting 10k? Does she not realise that there's more equity in the property? Are your numbers not including fees that would be incurred if you sell (eg agent costs, SDLT when you subsequently buy, etc)

Dixxy095

saajan_12 said:

Dixxy095 said:

Bookworm105 said:

is this a property you really, really, really, want to live in, or is it just "convenient" for now?

financially castrating yourself for a place you will leave in few years anyway seems pointless if the alternative is swallow some pride and go back to live with the bank of mum and dad

is part of the motive to deny her getting 15,000 from the equity split rather than 10,000 from the buy out ?
how will you feel living in a place that reminds you what it was like when you were a couple?

clean and total break time?
(I appreciate coming off the property ladder makes it harder to get back on if prices keep rising)

I think the main thing persuading me to want to buy her out is the fact that she only wants £10,000 which would leave me with more equity in the house than I’d get from selling currently 

Well what's the rationale for her only wanting 10k? Does she not realise that there's more equity in the property? Are your numbers not including fees that would be incurred if you sell (eg agent costs, SDLT when you subsequently buy, etc)

saajan_12 said:

Dixxy095 said:

Bookworm105 said:

is this a property you really, really, really, want to live in, or is it just "convenient" for now?

financially castrating yourself for a place you will leave in few years anyway seems pointless if the alternative is swallow some pride and go back to live with the bank of mum and dad

is part of the motive to deny her getting 15,000 from the equity split rather than 10,000 from the buy out ?
how will you feel living in a place that reminds you what it was like when you were a couple?

clean and total break time?
(I appreciate coming off the property ladder makes it harder to get back on if prices keep rising)

I think the main thing persuading me to want to buy her out is the fact that she only wants £10,000 which would leave me with more equity in the house than I’d get from selling currently 

Well what's the rationale for her only wanting 10k? Does she not realise that there's more equity in the property? Are your numbers not including fees that would be incurred if you sell (eg agent costs, SDLT when you subsequently buy, etc)

She wants a quick pay out rather than waiting for the house to sell with her paying 50% of the mortgage and not living in the house

ian1246

What's your current mortgage rate? 6.65% is pretty high? Is it worth moving back with your parents, using your equity to pay off your loan and then save every last penny you can?  Within 4 to 5 months of heavy saving you'll have rebuilt your equity & then you'll be in position to seeing what your mortgage affordability amount could be with your payrise & loans gone - possibly even allowing you to borrow a higher amount & afford a better property?

The interest rate may have dropped by then as well - allowing lower borrowing costs.

Remember interest rates drop on mortgage offers with every 5% of extra deposit you can save - on a £180,000 property that's £9000 - 4 months of saving. Within 12 years you could probably save a £24,000 deposit, plus have £5000 of your original equity left over.

15% of a £180,000 property £27,000. Pretty much guaranteed the mortgage rate would be a lot lower than 6.65%!!

That would be what I'd look at doing in your shoes anyway.

cjdew

Keep the house, get a lodger in the short term. 

Put all that they pay you into a savings bank account. 

When ready, use it to pay the normally allowable 10% off your mortgage annually.

At 5 year end, should have much lower rate and also more paid off mortgage. 

Keep the lodger for as long as you feel that you need. 

SarahB16

cjdew said:

Keep the house, get a lodger in the short term. 

Put all that they pay you into a savings bank account. 

When ready, use it to pay the normally allowable 10% off your mortgage annually.

At 5 year end, should have much lower rate and also more paid off mortgage. 

Keep the lodger for as long as you feel that you need. 

I know you say you don't want a lodger but I second getting a lodger at least for the short term.  It is very likely you won't need to pay any tax due to the 'rent a room' scheme. 

Perhaps there is a local hospital which has a noticeboard where you could advertise, i.e. do very targeted advertising based on your criteria. 

Albermarle

Has the value of the house been included in a total review of both of  your other assets?
such as savings, pensions etc?
Then a final and binding legal agreement?

If not, once the house is sold and money shared, there could well be other arguments about money for years to come.