Advice on Splitting Up

misha-k · 25 April 2018 at 11:17AM

Hi guys, so I'm new to the whole mortgage idea and I was wondering if I could get some advice.

My partner and I have been renting for the last 2 years and we are looking to potentially buy a house. The agreement we've had since we moved in together is if he and I were to ever split up, he'd move out and I'd stay in the apartment we're renting. We would like to keep up the same agreement if we were to buy a house, however we're not entirely sure if that's possible.

So for example:
House value - £130,000
Mortgage - £123,500
Repayment - £600 per month

If the above was true to our circumstances while we're together (Both names on the deeds) and we were to split up, would I be able to just continue to pay £600 a month as usual on my own or would I essentially have to remortgage and hope for the best the bank will lend me enough to cover the mortgage on a single income?

If the answer is the latter, would we be best continuing to rent? We've both previously been in long term relationships that ended after 5-7 years, so we're just being cautious in case it happens again. :money:

AnotherJoe · 25 April 2018 at 11:39AM

That woudl be a terrible idea for many reasons, including ;
Not a clean break
He'd still be liable for the mortgage
He most probably woudlnt be able to get another mortgage whilst he was still liable for one
Dealing with the equity in the property would be messy some years down the line.

Why not just buy with clear documented agreement what to do if you break up?

hazyjo · 25 April 2018 at 11:49AM

I can't imagine why you would want to be financially linked to an ex if you buy then split up. Hard for one to move on, and eventually the one who stayed will have to sell.

If you do buy and split up - I'd advise either one being able to afford it on their own (in the eyes of the bank and its lending criteria, not on what you say you can afford to pay), or sell.

Either buy cheap enough that one could potentially buy the other out, or buy in one name only, and definitely don't fix a long term mortgage deal. I'd suggest 2 years at a time or there can be penalties to get out.

Ruthie0889 · 25 April 2018 at 11:52AM

I think if you decide to buy together set up a declaration of trust/trust deed in case you do separate further down the line. That's what I have done with my partner if a separation happens.

Ruthie0889 · 25 April 2018 at 11:55AM

Also agree with hazyjo, if you were to get a mortgage together I would suggest 2 year fixed rate as the future can sometimes change dramatically which you can't always foresee.

If you opt for a 5 year rate and a separation did occur within 1-2 years, then there would be a hefty Early Repayment Charge for ending within the fixed rate.

saajan_12 · 25 April 2018 at 12:05PM

misha-k wrote: »

Hi guys, so I'm new to the whole mortgage idea and I was wondering if I could get some advice.

My partner and I have been renting for the last 2 years and we are looking to potentially buy a house. The agreement we've had since we moved in together is if he and I were to ever split up, he'd move out and I'd stay in the apartment we're renting. - well done for thinking about what might happen.. makes it much easier to have these discussions while you're still civil, and then put them in writing so you don't have to go back over them if/when things get angry.
We would like to keep up the same agreement if we were to buy a house, however we're not entirely sure if that's possible.

So for example:
House value - £130,000
Mortgage - £123,500
Repayment - £600 per month

If the above was true to our circumstances while we're together (Both names on the deeds) and we were to split up, would I be able to just continue to pay £600 a month as usual on my own - terrible idea:
- ex would still be on the mortgage thus limiting his borrowing capability if he wanted to buy / do something else wiht his money
- ex's capital would be tied up in an illiquid house,
- difficult to split value of house if/when you do sell when its been joint for some time then only you are paying mortgage
- ex liable for Capital Gains Tax for any value increase while he is not resident when eventually sold
- ex liable for higher rate stamp duty (extra 3%) if he wants to buy elsewhere while still having a share in joint property
or would I essentially have to remortgage and hope for the best the bank will lend me enough to cover the mortgage on a single income? - this would be better, remortgage for the outstanding loan plus pay out ex's share of any equity, so the property can be put entirely in your name, and you cut financial ties. Both are then more free to move on / make financial decisions.

If the answer is the latter, would we be best continuing to rent? - if you think you'll pass mortgage affordability to cover loan and partner's equity then its perfectly feasible. Otherwise, you could both just sell if you split up. Ofcourse would incur buying / selling fees, but depends on how likely that is, vs the benefit of buying for you.
We've both previously been in long term relationships that ended after 5-7 years, so we're just being cautious in case it happens again. :money:

I'd get a short fixed term. If you do split up:
1) get three valuations on the property and pick middle one
2) apply for a mortgage in your name only to cover the full loan + partner's share of equity based on that valuation
3) If you can, then buy out ex, pay out share of equity and transfer house in your name alone
4) If you can't then sell the house on open market, pay off mortgage and split proceeds between you.

MEM62 · 25 April 2018 at 12:40PM

A slightly left-field response I appreciate but the fact that this is a consideration would cause me to question whether, as a couple, you are ready for joint property ownership.

hazyjo · 25 April 2018 at 1:15PM

MEM62 wrote: »

A slightly left-field response I appreciate but the fact that this is a consideration would cause me to question whether, as a couple, you are ready for joint property ownership.

I've had to sell three before after failed relationships (one fianc!, two husbands). I am totally with the OP - I would also plan exactly as they are doing and tbh can't ever see me buying with anyone else again unless I could afford to keep it on my own and they were prepared to sell to me and move out.

I suppose if you've been through it (after thinking it would never happen to you), you're always going to be cautious. Nothing to do with how they feel about each other now or about commitment - more to do with the knowledge that situations and people can change.

MEM62 · 26 April 2018 at 9:40AM

hazyjo wrote: »

I've had to sell three before after failed relationships (one fianc!, two husbands). I am totally with the OP - I would also plan exactly as they are doing and tbh can't ever see me buying with anyone else again unless I could afford to keep it on my own and they were prepared to sell to me and move out.

I suppose if you've been through it (after thinking it would never happen to you), you're always going to be cautious. Nothing to do with how they feel about each other now or about commitment - more to do with the knowledge that situations and people can change.

I understand the concern over things not working out. If that is a major concern then they are not ready for joint property ownership.

A couple of years ago my OH and I decided to live together. We are both middle-aged and have had been married previously - also, she has two teenage children at home. Whilst we wanted to live together, at our ages we had the wisdom to realise that there were risks and things may not work out as we hoped. (Before meeting Kate I was single and had lived on my own, by choice, for 20 years so you can imaging the culture-shock of moving in with a girlfriend and two kids)

At that point, we were not ready to jointly own property as we did not want to risk the hassle and cost of sorting out a house if it didn't work out. It would just make a crappy situation even worse. In our case my OH bought a bigger house and I rented my place out. So we had a plan B.

As it happened things worked out just fine but both of us were glad that we took the approach that we did.

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Advice on Splitting Up

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