help to buy mortgage buy out

gingermoggy62

My partner wants to buy me out of our mortgage as we have separated, however we have a help 2 buy mortgage. She wants me to pay off my share of the H2B equity loan even though she intends to stay in or rent the house out. 

I think this is unreasonable as she will still have the benefit of the H2B loan. Surely she should be paying this off in full.
Anyone else been in this situation please?

MWT

gingermoggy62 said:

My partner wants to buy me out of our mortgage as we have separated, however we have a help 2 buy mortgage. She wants me to pay off my share of the H2B equity loan even though she intends to stay in or rent the house out. 

I think this is unreasonable as she will still have the benefit of the H2B loan. Surely she should be paying this off in full.
Anyone else been in this situation please?

This feels like only half the story... 

She should have given you a calculation that will be composed of your share of the equity that you currently own in the property, your share of the current value less your share of the remaining mortgage and H2B loan.

So that may be a small amount, or even a negative amount, but either way, she still has to deal with the entire mortgage and H2B loan on her own, so it is hardly a 'benefit'.

The better question though is will the mortgage lender and H2B agree to releasing you from the loans?

gingermoggy62

Thanks for your reply
It is her choice to buy me out and therefore she still has an asset/property as her disposal 

MWT

gingermoggy62 said:

Thanks for your reply
It is her choice to buy me out and therefore she still has an asset/property as her disposal 

Yes, of course, but equally you could offer to buy her out and in that case it would be up to you how you dispose of the asset once it and the loans are 100% your responsibility, and that would include what you decided to pay off and when.

You don't generally get to be bought out and still exercise control over how the other party handles the results of that process, as long as you are fully released of your obligations...

For clarity, it would help if you could share the calculation she has used, because while it is possible there is negative equity and so you owe her money, it would be more normal, even with the H2B loan that she would owe you money.

So you would not normally be paying off any part of the loans unless you were in negative equity, or unless she is proposing that you retain an interest in the property in some degree, which she may need to meet affordability requirements.

The whole thing feels odd though as she is going to struggle to get consent to let without at least clearing the H2B loan

gwynlas

Mortgages are granted on affordability so will she be able to buy you out?

gingermoggy62

There will be a decent amount of equity from the property which will also cover repayment of the H2B loan.
What I’m trying to ascertain is do we split the repayment of the H2B loan or should she be repaying in full as she is transferring the mortgage to her? 

MWT

gingermoggy62 said:

There will be a decent amount of equity from the property which will also cover repayment of the H2B loan.
What I’m trying to ascertain is do we split the repayment of the H2B loan or should she be repaying in full as she is transferring the mortgage to her? 

If she is buying you out then and there is positive equity then at its most basic, she gives you half the equity and you walk away. 

No repayment by you of anything as she is only giving you half of the equity, which is the market value less the loans.

If you both pay off the H2B loan (half each)  first, then the equity has now increased and the amount she has to give you has increased by the amount you paid off the H2B loan so she gains nothing from that and you would just get your money back from her by way of the increased equity payment.

If she thinks she can get you to repay half the H2B loan without your equity share increasing then there is something wrong with her calculations, but she may need to get the H2B loan paid off before she can remortgage, so in that context as long as you can protect your money during the gap between her remortgaging and then repaying you by way of your increased equity share then it might make sense...

It all depends on how she is calculating your share...

gingermoggy62

She has calculated my share as follows, I won’t include figures but it’s a 70/30 split in her favour

Deposit 
Mortgage cleared 
Increase in equity
Less 30% of H2B loan

MWT

gingermoggy62 said:

She has calculated my share as follows, I won’t include figures but it’s a 70/30 split in her favour

Deposit 
Mortgage cleared 
Increase in equity
Less 30% of H2B loan

The numbers would have helped, but still working in the abstract, to buy you out, you subtract the H2B loan percentage from the current value (as that is how they set the repayment amount as a percentage of the current value not the purchase price), then subtract the remaining amount on the mortgage, that leaves you with the equity that your deposit and your mortgage payments have bought. (assuming you are still in the 0% interest period of the H2B loan)

If the deposit and the mortgage payments were provided from you both 70/30 then split that remaining amount 70/30 and that is what she owes you.

That would leave her the the property 100% in her name, but still with the mortgage and the H2B loan to clear.

You can't repay the mortgage without also repaying the H2B loan, and however you look at it , repaying the mortgage or the H2B loan is a zero-sum game for your share if it is still on the same 70/30 basis. Whatever you pay off of the loans she would owe you back in your share of the equity. 

If you are walking away in exchange for your share of the current equity then you do not owe any part of the H2B loan or the mortgage.

Do remember you have to start from the current value of the property, and also consider that this plan may not even work unless she has sufficient income to convince the lenders that she meets the affordability criteria...

If not then the property just has to be sold with you both sharing the ultimate remaining proceeds after settling mortgage, H2B loan and costs.....

gingermoggy62

Thank you!
Current value £255000
Mortgage outstanding £141000

MWT

gingermoggy62 said:

Thank you!
Current value £255000
Mortgage outstanding £141000

H2B Equity Loan percentage?