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Leaving a joint mortgage in negative equity
Mariemartin1950
Posts: 3 Newbie
Hi
My ex and I bought a property at the height of the property boom. We have recently split and need advice. He paid the 10% deposit on a new build home.
Currently if we were to sell the property we would still owe approx 60k to the mortgage lender which we would have to split 50:50. Neither of us can afford this so this is not an option.
Our mortgage lender will agree to transfer the existing mortgage into 1 name but based on 90% LTV this still leaves a negative balance of £15k. He is not willing to pay this balance and neither am I so we are both stuck.
If he wont pay £15k I want to say I'll pay some of the balance of the 15k deficit to get out of it and he takes over the mortgage but how much? Effectively this will be his investment which he can rent out and profit from in a few years when things return to positive territory. He wants to carry on jointly owning until the market improves but practically this is not possible and can take years.
As he is unwilling to budge I am now thinking of taking on the mortgage myself, subject to lenders approval. Legally, as it is in negative equity there is no 50% gain on the value of the property to pay him to get him off. So can I just agree to pay the £15k deficit (if I borrow the money that is) and then the mortgage and equity can be mine? What about his initial deposit? Surely that is now lost as the value of the property and his share of the equity is not worth anything? Whoever takes on the mortgage is effectively taking on their share of the negative equity so in a sense doing them a favour right? Therefore, no cash to each other can legally be requested by either party?
Any advice will be welcome!
My ex and I bought a property at the height of the property boom. We have recently split and need advice. He paid the 10% deposit on a new build home.
Currently if we were to sell the property we would still owe approx 60k to the mortgage lender which we would have to split 50:50. Neither of us can afford this so this is not an option.
Our mortgage lender will agree to transfer the existing mortgage into 1 name but based on 90% LTV this still leaves a negative balance of £15k. He is not willing to pay this balance and neither am I so we are both stuck.
If he wont pay £15k I want to say I'll pay some of the balance of the 15k deficit to get out of it and he takes over the mortgage but how much? Effectively this will be his investment which he can rent out and profit from in a few years when things return to positive territory. He wants to carry on jointly owning until the market improves but practically this is not possible and can take years.
As he is unwilling to budge I am now thinking of taking on the mortgage myself, subject to lenders approval. Legally, as it is in negative equity there is no 50% gain on the value of the property to pay him to get him off. So can I just agree to pay the £15k deficit (if I borrow the money that is) and then the mortgage and equity can be mine? What about his initial deposit? Surely that is now lost as the value of the property and his share of the equity is not worth anything? Whoever takes on the mortgage is effectively taking on their share of the negative equity so in a sense doing them a favour right? Therefore, no cash to each other can legally be requested by either party?
Any advice will be welcome!
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Comments
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Happy to help although not sure I am following the numbers fully.
If there is no equity in the house then no one can come after it. Is your partner wanting the cash they put in as deposit (or is that what you fear?) as depending on how you split your finances at the time, it could be deemed reasonable.
However if you are in negative equity to the tune of £60K I am missing how you will get a mortgage at 90% LTV????
Perhaps it would help if you list out the original purchase price, deposit, amount currently owed on mortgage and current value0 -
[STRIKE]I'm confused by teh figures too, but I think OP means:
Current mortgage balance is £60k.
The property is now worth £50k.
If they reduced the mortgage by £15k, they'd be at 90% LTV. (90% of £50k is £45k).
If that's the case, then I think OP should check whether a mortgage at 90% LTV would still be available if they were to borrow the £15k to reduce the mortgage.[/STRIKE]
Scratch all that - I misunderstood completely.0 -
Ok sorry ... Figures are, rounding up slightly:
Current house valuation - £186k
90% LTV based on the above - £169k
Current outstanding joint mortgage value - £184k
Deposit paid - £10k (as a new build part of the deposit was paid by the developer)
Original mortgage value - £194k ... Therefore after 5 years we have paid roughly £10k back
The £15k deficit is if 1 person took out 90% LTV is the difference between 184k owing and 90% of the LTV I.e. £169k
The current selling price is way below the value of the property at £125k based on the most recent sale of our neighbours property. This is where the huge £60k negative equity comes in
Does this help? The property value isn't that bad but we would not get anywhere near that number if we were to sell.
All in all an absolute shocking investment!0 -
i'm no expert, but in my opinion, i think its not fair if he loses both his deposit, AND also has to stunp up 50 % of the negative equity too!
you got to ive in the house, and purchase it, based on his deposit, putting none in yourself, and i would think it was only fair that you split the negative equity in half, for liability, plus you owe him half his deposit back...then you both end up in the same financial position...
that is the only fair outcome imo...
what you do from there, i do not know.0 -
I'm sorry but I'm still confused.
I can't square:
withMariemartin1950 wrote: »Current house valuation - £186k
90% LTV based on the above - £169kMariemartin1950 wrote: »The current selling price is way below the value of the property at £125k based on the most recent sale of our neighbours property.
When was the "current" house valuation done? And was it done by a surveyor or an estate agent?
If the true value is £125k, you could only borrow 90% of that - unless your lender is prepared to do a transfer of equity without a new valuation. I'm not sure whether they'd do that, but I think it sounds unlikely.0 -
The current valuation was 2 months ago and was what the mortgage lender quoted as what they valued the property at based on Halifax price index and this is also a similar value as per zoopla. So the 90% LTV was based on that. As there are a number of similar new builds nearby and they are starting at 130k, that backs up the most recent selling price of a similar property I.e. £125k
Hope that makes sense
Thanks for your advice!0
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