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  • FIRST POST
    • Nominada
    • By Nominada 6th Jul 18, 11:41 AM
    • 10Posts
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    Nominada
    Break up, joint ownership, cohabitation agreements signed
    • #1
    • 6th Jul 18, 11:41 AM
    Break up, joint ownership, cohabitation agreements signed 6th Jul 18 at 11:41 AM
    Hi there! I’ve got a situation I’m ill equipped to plan out well.

    I’m 31. I have what Is considered a ‘perfect credit score’... it is because of my credit score that we were able to secure a good mortgage rate. My partner and I bought a house together earlier this year (we have been together 10 years) but now, due to a whole plethora of unfortunate events and realizations, we are going to be breaking up (this discussion has not yet occurred). But we will be.

    So. It was a 270k house. We put down 152k. Most of of it was my fianc!’s money, I paid about 1/3 and he paid 2/3 of the deposit. We both agreed we would each pay half in the end. Mortgage payments are less than a normal person’s rent, especially when you consider we pay half each. We also split utilities 50/50. In total we each contribute about 630 (combined is 1260) a month, but that includes our share of taxes, utilities, and mortgage. It’s a good location for both our works, and we work from home. The title is joint and we both own 100%. He purchased all new appliances at his preference (though it shows up in the paperwork that I paid half on card, it was from his money). We repainted the walls. We installed hardwood. He paid most of the costs, again.

    Decent sounding investment if it worked out, right?

    Fast track to now. We have a cohabitation agreement signed where either one of us can end things at any time and we choose to sell the house or not (to each other or to someone else). Profits are split 50/50 after deductions — if you were paying attention, that means I come out ahead since he paid 2/3 and i paid 1/3. However That would require trying to sell the house ‘earlier than intended’. We have a three year mortgage contract with 2.5 years remaining. I’m not sure if the bank would allow us but we could also consider renting. Point being: I am unsure which path is more intelligent from a financial and personal perspective.

    I intend to live abroad in mainland europe, but also return to our home city as I have work in both locations. Currently our home acts as a studio for both of us. I am also looking for a permanent studio on the mainland (rent or buy, undecided).

    Is it wiser to be cordial and pay our fees till we re-mortgage the house in 2.5 years and then sell/rent it and owe less? We could one or both of us use the house as studio space till then (if both, this would mean a messy break however).

    Is it wiser to make a deal with my soon to be former partner and have him buy me out at what I put in, providing he promises to pay all mortgage and monthly fees from them on? This would be a clean break but I do not see the investment gain here.

    Is it wiser to consult our lending bank and ask if selling immediately/renting immediately is ok? This would mean a loss of studio space and require us to move completely.

    Force a Sell, or rent, or endure?

    Perhaps there is another option I’m not considering? I do not think he would be open to accepting a roommate in order to pay the house off faster. However we can make lump sums to our mortgage and get it whittled down quick if we want to. I personally do not have the funds, but he does.

    I have 11.5k in savings.
    I also borrowed 11.5k from our ‘cash’ which then technically I owe him... but it’s not something that has a paper trail. However he will be upset if I don’t pay it back so I will.

    If you consider that, I have no savings.

    Seeking advice of the financially astute and heart-conscious. I want to move on. It’d be easier with a nest egg (but I think I could save funds and create a tidy sum if I just hold off on the breakup a little longer).

    Thoughts? Thank you!!
Page 1
    • Tom99
    • By Tom99 6th Jul 18, 12:17 PM
    • 2,615 Posts
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    Tom99
    • #2
    • 6th Jul 18, 12:17 PM
    • #2
    • 6th Jul 18, 12:17 PM
    If he can afford to buy you out and have the house and mortgage tranfered into his name that will be the best option.
    • Nominada
    • By Nominada 6th Jul 18, 12:23 PM
    • 10 Posts
    • 1 Thanks
    Nominada
    • #3
    • 6th Jul 18, 12:23 PM
    • #3
    • 6th Jul 18, 12:23 PM
    Urban can afford to buy me out, yes — if you suggest that, should he buy me out at half the appraised current value (as if I had sold my half share) or at what I contributed?
    • ThePants999
    • By ThePants999 6th Jul 18, 12:29 PM
    • 1,257 Posts
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    ThePants999
    • #4
    • 6th Jul 18, 12:29 PM
    • #4
    • 6th Jul 18, 12:29 PM
    If you bought the house this year, and seek financial separation immediately, you're really looking to be put back in the position you were in before you bought it (less any costs). Any change in value isn't worth worrying about.

    How much is your early repayment charge?
    • davemorton
    • By davemorton 6th Jul 18, 12:32 PM
    • 26,716 Posts
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    davemorton
    • #5
    • 6th Jul 18, 12:32 PM
    • #5
    • 6th Jul 18, 12:32 PM
    I would say one third of the amount the house is worth now, with maybe a little extra on top for the extra sixth of the mortgage you have been paying above your share. Utilities etc it is fair that you both paid the same (if we are going down the clinical route)
    “Quis custodiet ipsos custodes?”
    Juvenal, The Sixteen Satires
    • Ruthie0889
    • By Ruthie0889 6th Jul 18, 1:09 PM
    • 6 Posts
    • 3 Thanks
    Ruthie0889
    • #6
    • 6th Jul 18, 1:09 PM
    • #6
    • 6th Jul 18, 1:09 PM
    If he can afford to buy you out then that is your best option.

    If not, then it would be better to sell in the long run.

    I personally don't think you would be able to properly move on if you are still tied into the house.

    It is a tough situation and I completely sympathise
    • gingercordial
    • By gingercordial 6th Jul 18, 1:49 PM
    • 1,221 Posts
    • 1,281 Thanks
    gingercordial
    • #7
    • 6th Jul 18, 1:49 PM
    • #7
    • 6th Jul 18, 1:49 PM
    Urban can afford to buy me out, yes — if you suggest that, should he buy me out at half the appraised current value (as if I had sold my half share) or at what I contributed?
    Originally posted by Nominada
    I want to check what you mean when you say he can buy you out.

    You say the house was worth £270k and you put down £152k, so you have a mortgage for £118k.

    1/3 of the deposit was yours so that's £51k.

    To buy you out, you need to come off the mortgage and receive your deposit (or whatever you decide) back from him.

    That means he has to either pay in cash or remortgage on his own for £118k (paying off existing mortgage) plus £51k (to you) = £169k plus any fees such as the early redemption cost.

    However you say that your credit record was the reason you were able to get the mortgage you currently have. Therefore does he really have the means to raise £169k by mortgage as a sole applicant and/or using cash he already has? He would need to look at affordability for this himself and with his own credit rating.

    I cannot think that so much has changed in less than a year with his credit record that, if yours was crucial at the time of purchase, he can do it alone now. But this depends on what was wrong with his credit record. Was it simple lack of history ie he hadn't had credit cards etc before? Or have there been defaults that will need to drop off in due course? If so, if you wait the remaining 2.5 years for the ERC to go away, is it likely his credit record will have significantly improved by then?

    Sympathies also, this sounds like a very difficult situation.
    • Nominada
    • By Nominada 6th Jul 18, 10:44 PM
    • 10 Posts
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    Nominada
    • #8
    • 6th Jul 18, 10:44 PM
    • #8
    • 6th Jul 18, 10:44 PM
    I’m not sure offhand how much the repayment charge would be ... but perhaps it’d be possible to do an under the table payment where I wipe my hands if it and he takes full payment upon himself?
    • Thrugelmir
    • By Thrugelmir 6th Jul 18, 10:53 PM
    • 59,781 Posts
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    Thrugelmir
    • #9
    • 6th Jul 18, 10:53 PM
    • #9
    • 6th Jul 18, 10:53 PM
    I’m not sure offhand how much the repayment charge would be ... but perhaps it’d be possible to do an under the table payment where I wipe my hands if it and he takes full payment upon himself?
    Originally posted by Nominada
    Then your ex has the upper hand. No guarantee that they will sell up or remortgage. Simply remain in situ.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Nominada
    • By Nominada 7th Jul 18, 1:00 AM
    • 10 Posts
    • 1 Thanks
    Nominada
    So rather than have him pay me a fixed amount and do what he wants with the house till remortgaging... you suggest any of these options?

    1. Selling it (there'd be a prepayment penalty).
    2. Letting one party live in it but take over all expenses except 1/2 the mortgage. Both names remain on the deed until mortgage re-evaluation or a sell
    3. Pay off mortgage as much as one can, and rent the property out meanwhile. After a few years sell the house. Means being tied to your ex in a landlord partnership for the duration of the ownership.
    • Nominada
    • By Nominada 7th Jul 18, 1:01 AM
    • 10 Posts
    • 1 Thanks
    Nominada
    Thank you -- it is tough. I am OK if he were to buy me out, though not sure how complicated that is. :/
    • Bass_9
    • By Bass_9 7th Jul 18, 6:43 AM
    • 139 Posts
    • 162 Thanks
    Bass_9
    I'm coming at this from a different angle, but it seems a shame you're in this situation so soon after buying, and after 10 years together. I understand there will probably be good reasons for splitting up, and I don't want to sound like a therapist, but you also say it isn't official. Are you sure you're both on the same page? Is there not a way you can work this out together?

    Apologies for not providing any financial advice, but I guess it would be ideal if you could happily stay together and avoid all this... For once I'm being an optimist.
    • getmore4less
    • By getmore4less 7th Jul 18, 7:23 AM
    • 33,046 Posts
    • 19,924 Thanks
    getmore4less
    trying to get my head round the numbers to get an estimate of where you both are

    I will cut out the non financial stuff



    It was a 270k house. We put down 152k.
    Most of of it was my fianc!’s money,
    I paid about 1/3 and he paid 2/3 of the deposit.

    (you £51k, him £101k mortgage £118k who paid the fees?)

    We both agreed we would each pay half in the end.
    (how were you planning to do this?)

    Mortgage payments ------ we pay half each.
    (thats another £59k worth of equity each)

    He purchased all new appliances at his preference (though it shows up in the paperwork that I paid half on card, it was from his money).

    We repainted the walls. We installed hardwood. He paid most of the costs, again.
    (how much has been invested in the property what shares)


    Fast track to now. We have a cohabitation agreement signed where either one of us can end things at any time and we choose to sell the house or not (to each other or to someone else). Profits are split 50/50 after deductions —
    (what are the list of allowable deductions? did the agreement cover further investments like the floors? and what happens if you are at a loss)


    I have 11.5k in savings.
    I also borrowed 11.5k from our ‘cash’ which then technically I owe him...

    If you consider that, I have no savings.
    Originally posted by Nominada
    What's the place worth now?

    there are some numbers missing but based on the short time frame I think we can work on the basis that everything is as the same cuurent value.

    IE everything paid out buys the same bit of equity as if you paid it out to buy the place.

    Total costs of purchase is £270k + fees + investments(costs of improvements/maintenance).

    basing on an equitable basis

    if you paid none of the extras your share is just the £51k+£59k £110k of £270+... that will be something under 40%. if you did pay some then you adjust for that.

    you get back that % of the property less 1/2 the mortgage less the £11.5k loan.

    NOTE there are sunk costs when buying/selling that you don't get back so every purchase is in negative equity based on total costs to buy/sell.


    now the agreement may adjust exactly how you deal with the profit/loss which may mean you take 50% of the hit if there is a loss.

    THE key to moving forwards and clean break is the OH getting a mortgage for the amount needed to get you off the deeds and loan.
    • Nominada
    • By Nominada 7th Jul 18, 12:33 PM
    • 10 Posts
    • 1 Thanks
    Nominada
    Ah -- yeah, sadly, we fell under the spell that things would get better once we bought our own place. But instead the problems between us just became more obvious. There's been a few big catalysts that brought me here -- but I have tried to work things out. Even after he cheated on me a few years ago I tried to work it out. I'm at that point where I realize I have one life, so I should live it happily and not force myself to try and be happy. Thank you though xoxo
    • Nominada
    • By Nominada 7th Jul 18, 1:49 PM
    • 10 Posts
    • 1 Thanks
    Nominada
    Fees and whatnot: We split the fees in half, for all the things

    Exception is for the renovations (floors/paint) and the appliances. He chose to replace appliances even though it wasn't required. In total we paid about £2.3k for appliances and £9.2k for renovations. So £11.5k altogether. I paid for about £3k of that.

    When we bought the house we looked at it from an individual perspective like, ok so can you afford half of this and I can afford half of this? This however was not written in the cohabitation, it was just an understanding... or misunderstanding. Needless to say it's moot now we've signed the cohabitation agreement and defined the point we split the sale equally.

    So if there's £118k mortgage remaining, we are allowed to pay 20% lump sum every year... so £94.4 if we max that out in year 1. That minus any other monthly payments. He might be able to swing that, actually. We would get dinged the fee of remortgaging, which could be a massive amount, I don't know. My broker has yet to get back to me and I don't see it specified in the contract. But perhaps it is worth the cost of a clean break.

    About a clean break: we are both in the same business and go to the same events (20+ a year)... so we WILL see each other and our circle of friends remains the same so... a clean break might be impossible. An amicable, responsible break... ideal.

    The cohabitation agreement specifies that if we sell the house to a third party, then the sale proceeds minus financial encumbrance and fees/commissions shall be divided equally. If one of us intends to sell, we write that to the other party and they have first right of refusal and then 3 months or else it goes up on the market. And if there is an offer of 90% or higher than our asking price, we have to accept it unless we both agree not to. We each have right of first refusal to purchase the property from the other before selling to a third party. I paid for the cohabitation agreement but any legal fees thereafter will also be split half.

    The cohabitation specifications are upheld whether we are together or not together, so legally, in writing... I can break up with him now, and let him live in the house, then choose to tell him I want to sell after the three years are up and he will be forced to sell or evaluate then. It's written that we have to agree to cooperate with all matters in the cohabitation agreement, so if one party wants to sell then the other party does have to cooperate (and if first right of refusal is exercised, there is a time limit of three months for affairs to be put in order or else the house is put on the market). Perhaps it is better to just pay the mortgage payments till then? There's nothing saying I -have- to pay 50% utilities and such... that can be up to whoever lives in the house. But is it financially a sink hole if I pay my share of the mortgage for the remaining 2.5 years?

    So to sum up
    Total house cost (not including furniture)

    My current contributions: £51k (deposit) + £3k (renovations) + £1.7k(misc expenses), + £1.7k (current mortgage/tax contributions) = £57.4k

    His current contributions: £101k (deposit) + £8k (renovations) + £1.7k (current mortgage/tax contributions) = £110.7k

    If we didn't make lump payments to the mortgage and I paid every month from now till the mortgage is renegotiated (another 2.5 years), I would be paying £3.5k in mortgage/interest... £2.8k in property taxes... and £700 in property insurance. And that's rounding up to give myself room for error. Total of £7k

    I estimate the house would be appraised at around £280k-£290k, as we did make some nice improvements.We purchased it for £270k.
    Last edited by Nominada; 07-07-2018 at 2:03 PM.
    • Thrugelmir
    • By Thrugelmir 7th Jul 18, 1:59 PM
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    Thrugelmir
    I paid for the cohabitation agreement but any legal fees thereafter will also be split half.
    Originally posted by Nominada
    Did you partner seek independent advice on the documents drawn up.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Nominada
    • By Nominada 7th Jul 18, 2:02 PM
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    Nominada
    Yes, there were two lawyers involved and he did seek independent legal advice as per the contract.
    • Bass_9
    • By Bass_9 7th Jul 18, 3:06 PM
    • 139 Posts
    • 162 Thanks
    Bass_9
    Ah -- yeah, sadly, we fell under the spell that things would get better once we bought our own place. But instead the problems between us just became more obvious. There's been a few big catalysts that brought me here -- but I have tried to work things out. Even after he cheated on me a few years ago I tried to work it out. I'm at that point where I realize I have one life, so I should live it happily and not force myself to try and be happy. Thank you though xoxo
    Originally posted by Nominada
    Sorry to hear that but glad you've got a positive focus for the future, as you say much better leaving now than trying to force yourself to be happy. For what it's worth best of luck OP, hope you can get the financial side sorted out amicably without too much pain. x
    Last edited by Bass_9; 07-07-2018 at 3:08 PM.
    • Nominada
    • By Nominada 7th Jul 18, 3:56 PM
    • 10 Posts
    • 1 Thanks
    Nominada
    Update: I looked at the contract, it's a 3 year fixed mortgage, so if we sold the house we would ONLY be penalized 3 months worth of interest... or the interest rate deferential. Waiting to hear back about which. Estimates put the penalty at about 1.2k
    Last edited by Nominada; 07-07-2018 at 4:04 PM.
    • Thrugelmir
    • By Thrugelmir 7th Jul 18, 6:18 PM
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    Thrugelmir
    Estimates put the penalty at about 1.2k
    Originally posted by Nominada
    By the time the sale of the property is complete. More of the mortgage will have been repaid. There's selling costs to be considered, however £600 each is a small sum. When put in context of moving on with your lives.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
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