What to do with windfall - negative equity, needs lease extension, jointly owned with ex

zedonk

Hi all, 

I jointly own a flat with my ex. It's leasehold with only 64 years left on the lease. When we split up, we were in negative equity and couldn't afford to extend the lease or sell, so I've continued living here and paying the mortgage myself, while she rents elsewhere. Money has been tight for both of us - she's on benefits, and I had a freelance business that struggled in the pandemic, but am now employed on a salary of £38K.

I'm now expecting a windfall (inheritance) that *should* be enough to pay off the mortgage and extend the lease, though I don't have exact figures yet.

I'm trying to figure out the best way forward. One option would be to extend the lease, then put the flat on the market and not pay off the mortgage until it sells, and use some of my windfall as a deposit on a new property. Presumably my ex's share in any equity from the sale would take into account what I've invested to extend the lease?

But another option could be to pay off the mortgage ASAP, so I don't keep paying interest on it while sorting out the lease extension and waiting for the flat to sell - or I could even continue to live here mortgage free. Is this a wise move or does it complicate things with my ex too much? I suppose the plan would be get the flat valued with its current lease length (tricky as it's unmortgageable and would basically need to sell at auction), then buy my ex out based on that and pay off the mortgage at the same time? But without extending the lease, it's possible we're still in negative equity.

Any thoughts please? 

sammyjammy

If you are happy in the flat why not stay, agree a sum based on how things are now with the mortgage and the lease with the ex and once thats settled repay the mortgage and extend the lease.

Nothing stopping you changing your mind and moving later.  Thats what I would do.

ReadySteadyPop

zedonk said:

Hi all, 

I jointly own a flat with my ex. It's leasehold with only 64 years left on the lease. When we split up, we were in negative equity and couldn't afford to extend the lease or sell, so I've continued living here and paying the mortgage myself, while she rents elsewhere. Money has been tight for both of us - she's on benefits, and I had a freelance business that struggled in the pandemic, but am now employed on a salary of £38K.

I'm now expecting a windfall (inheritance) that *should* be enough to pay off the mortgage and extend the lease, though I don't have exact figures yet.

I'm trying to figure out the best way forward. One option would be to extend the lease, then put the flat on the market and not pay off the mortgage until it sells, and use some of my windfall as a deposit on a new property. Presumably my ex's share in any equity from the sale would take into account what I've invested to extend the lease?

But another option could be to pay off the mortgage ASAP, so I don't keep paying interest on it while sorting out the lease extension and waiting for the flat to sell - or I could even continue to live here mortgage free. Is this a wise move or does it complicate things with my ex too much? I suppose the plan would be get the flat valued with its current lease length (tricky as it's unmortgageable and would basically need to sell at auction), then buy my ex out based on that and pay off the mortgage at the same time? But without extending the lease, it's possible we're still in negative equity.

Any thoughts please? 

 Sounds complicated if your ex is a part owner but you are picking up the tab for everything? Keep the windfall out of the property and ask your ex to split the cost of extending the lease, then decide to sell or maybe buy your ex out if you want to live there? The drop in value will mean you are paying less than you might have?

Herzlos

Do you want to keep living there? If not what's your plan for after selling?

The most MSE thing, and probably least hassle, is to buy out your ex. That way you're living mortage free (hopefully), don't need to move etc. 

Once you have the windfall amount, you should establish how much ex will want for their share of the house. Simplest is a 50/50 split of an agreed value, but if she moved out a while ago or there was a discrepancy in deposits/contributions it may be a different split. 

Even if after buying out ex and extending the lease if there isn't enough to clear the mortgage entirely you'll be in a much better position financially paying down the mortgage and will own 100%, 

Bigphil1474

If you are in negative equity and you are paying the mortgage alone, why the need to pay off your ex partner? Get her to agree to give up any claim to the property, get it all in your name, then work out if it's worth extending the lease and/or paying off the mortgage. Personally I would always prefer a freehold house, but depends what you can afford. Obviously, any inheritance is only useful when it's in the bank. (We waited nearly a year after a relative passed before we actually received what the solicitor said we'd get in a 'month or two')

Albermarle

Bigphil1474 said:

If you are in negative equity and you are paying the mortgage alone, why the need to pay off your ex partner? Get her to agree to give up any claim to the property, get it all in your name, then work out if it's worth extending the lease and/or paying off the mortgage. Personally I would always prefer a freehold house, but depends what you can afford. Obviously, any inheritance is only useful when it's in the bank. (We waited nearly a year after a relative passed before we actually received what the solicitor said we'd get in a 'month or two')

As above.

Your ex owns half of the property as it is. So in fact her share is currently worthless/negative value.
Therefore you should try and persuade her to just give up on the property with no money changing hands. In theory she will be relieved of a potential financial burden. If you sold now, she would be liable for funding half the negative equity.
I would not tell her about any potential inheritance, as it may complicate things.

ReadySteadyPop

Albermarle said:

Bigphil1474 said:

If you are in negative equity and you are paying the mortgage alone, why the need to pay off your ex partner? Get her to agree to give up any claim to the property, get it all in your name, then work out if it's worth extending the lease and/or paying off the mortgage. Personally I would always prefer a freehold house, but depends what you can afford. Obviously, any inheritance is only useful when it's in the bank. (We waited nearly a year after a relative passed before we actually received what the solicitor said we'd get in a 'month or two')

As above.

Your ex owns half of the property as it is. So in fact her share is currently worthless/negative value.
Therefore you should try and persuade her to just give up on the property with no money changing hands. In theory she will be relieved of a potential financial burden. If you sold now, she would be liable for funding half the negative equity.
I would not tell her about any potential inheritance, as it may complicate things.

She might be waiting for the market to recover? Why is she not paying her share of the mortgage debt interest if she is part owner? Definitely keep any windfalls/inheritance etc. away from the property market in my opinion (general observation)

dannim12345

I would say you don’t want to extend the lease (with your own money) and then sell and split 50/50.  Buy out before or make a written agreement regarding the split (if any) before you extend the lease. 

Herzlos

zedonk said:

I suppose the plan would be get the flat valued with its current lease length (tricky as it's unmortgageable and would basically need to sell at auction), then buy my ex out based on that and pay off the mortgage at the same time? But without extending the lease, it's possible we're still in negative equity.

Sorry, I missed the potential negative equity bit. 

What you propose is the fairest option; buy the ex out at the current rate. If there's equity offer a share of that, if it's negative then offer to just write it off. 

Logically you'd be able to do the same windfall or not, though I suspect you need the windfall to be able to get a mortgage in just your name, but you don't need to provide any details on that to the ex. A simple "The bank will let me take over the mortgage in just my name now" should suffice.

Do it based on the house now, with the short lease. Because if you're still in negative equity you wouldn't be extending the lease either. 

zedonk

Thanks all. It sounds as though the most sensible thing to do is get the flat valued now, then buy out my ex (or write off her share if we're still in negative equity) before I consider extending the lease, paying off the mortgage or selling. 

My ex is on benefits and not in any position to contribute financially, so far as I know.

Right now I'm undecided whether I want to move closer to friends and family (which would mean a new mortgage because it's a more expensive area - and I'd do freehold this time!) or just stay here potentially mortgage free.

Of course I don't know when I'll get the inheritance, my relative's house has to sell first and that makes the amount uncertain too, so I'm just trying to get straight in my head what I could do when the time comes. 

zedonk

Herzlos said:

Because if you're still in negative equity you wouldn't be extending the lease either. 

Sorry if I'm missing something - why would I not extend the lease if I'm in negative equity?