Relationship Split, Mortgage & Legal Advice Pls....

GarethC_2

After a bit of both mortgage and legal advice for a friend of mine please….

Earlier on this year he bought a house with his girlfriend, even though her names on the mortgage he’s paid for everything inc all bills since living there. Unfortunately they’ve now split up, they paid 154k for the new build house and it’s just been valued at 140k due to the fact that they’re still building on the site so theirs new ones still to buy. She’s demanding that they sell it and doesn’t care if they make a loss; however my friend wants to keep the house he can afford to, however the mortgage company won’t let him have the mortgage in just his name. I’ve told him to go down the route of having one of his parent’s names on the mortgage however if for some reason that route isn’t viable what are his options????

Does he have to sell and make a loss just because she demands it??

Say he does keep the mortgage going with her name on it and then sells the property in 6 years is she then entitled to a share even though she will have never put a penny into the property??

Cheers

Gareth

Conrad

I think she can demand he sell - put yourself in her shoes, would'nt you want to disentangle yourself so you could start afresh?

Would she not now be liable to pay halve the loss?

Also I note you say the value has fallen due to the building site being unfinished, but this is not the only factor. Prices are falling because of the credit crunch.

GarethC_2

Yes I know thats not the only factor regarding the value however I'm not wanting to make this a house prices are dropping thread thankyou.

Yes you would have thought she would be liable for half the loss but then she's made it quite clear that she won't be paying anything! So Yes in her shoes I would want to sell it but if she won't foot the bill for any loss would you take the hit if you were in his shoes??

lightspeed

I was in this situation last year - bought a house, split up with gf and then faced the choice of selling at a loss (for different reasons to your friend) or taking on a largish (on my salary) mortgage myself.

The bottom line is this...she cant sell without the consent of the other person on the mortgage. However, she can pursue legal advice and ultimately get the courts to settle the matter (either he buys her out, or they sell) - will be expensive and stressful.

If the mortgage company wont allow your friend to take on the mortgage by themselves they are doing so because he CANT AFFORD it based on their lending criteria. His only option would be to get a better paid job asap, put someone else on the mortgage (always risky unless its someone you trust completely) or reduce the mortgage balance to an amount that works with his current salary (this is what i had to do).

These situations are never easy but i would be VERY concerned if the property is now valued less than it was purchased for, and even more concerned IF the mortgage is currently greater than that valuation.

Alternatively, he might have to bite the bullet and sell at a loss. Better that than trying to save a lost cause (a house that has already seen a decrease in its value) and getting into a financial mess for the sake of pride.

GarethC_2

appreciate what your saying lightspeed however he can afford the mortgage on what he earns just not what he declares he earns! I know it would probably be easier to sell up however he would have to buy another place which would mean spending more money on solicitors fees stamp duty etc etc....I'm pretty sure trying to get a relative to go on the mortgage is probably his best option albeit a bit risky.

ixwood

I don't understand. Why does she want him to sell the house and realise a joint loss?

As for him buying her out, its worth less than the mortgage (and only going to get worse), so surely SHE would have to pay him half the difference and half the selling costs to buy herself out?

Some gold diggers might have a surprise when they realise they've stole half a liability.

zzzLazyDaisy

You are assuming they are in negative equity. Depending on how much deposit was put down there may still be money released after the sale.

But what is the alternative? She agrees to leave her name on the mortgage just to help him out? And if he defaults she is jointly liable for the debt.

I can't see what is so wrong about her wanting her name off the deeds and the mortgage, allowing her to start again. If that means selling up, so be it.

GarethC_2

Yes they are in negative equity....

Nothing wrong with her wanting her name off, but she was happy to take half the profit had the property have risen in value, but shes not prepared to pay half the debt now when the property has made a loss.

GarethC_2

If he does take on a new mortgage for the house the mortage will be for 140k leaving 14k still unacconted for....will she still be liable for half of this??

homer_j_3

A couple of key points here

Your friend can afford it on what he actually earns rather than what he declares. I am not going to get into debate about tax evasion but if he is self employed, it would require him to have 3 years accounts or he would have to self cert on a sufficient net profit figure to get the mortgage in his own name. The self cert figure should be the figure that he is recording on tax returns too.

The 2nd issue is that nobody is really doing 100% mortgages. So he may have to find at least 5% or as much as 15% as a deposit to get a remortgage depending on whether he would be self cert or proving income through accounts.

The 3rd thing would be that the value that needs to be used is not the EA valuation but the surveyors valuation for the lender as that is ultimately what everybody relies on when selling/buying. I would therefore not agree to any amount at this stage for her to buy herself out of the property/debt. I would consider it to be more complex than this and what the amount should be will be based on a number of factors.