Can I protect myself from negative equity?

A reader is planning to buy out their partner's ex from a mortgage. However, she wants to protect herself from the threat of negative equity.

Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes her through the problem.

A reader from London asks:

My boyfriend purchased a house with his then girlfriend and she now wants her name to be taken off the mortgage.

Unfortunately the mortgage company will not allow him to be sole person on the mortgage in the current climate even though he has always paid the total mortgage. I have therefore agreed to put my name on the mortgage.

I will pay to buy her out and have a solicitor to cover this which includes me paying the stamp duty and fees etc, but will not actually be paying any off the mortgage.

As the house is currently in negative equity is their anyway I can protect myself if we were to split up i.e. can any sort of contract be drawn up to protect me?

Tony replies:

The mortgage company will not allow you to be joint owner and not be jointly and severally liable for the mortgage and its payment, as they have already indicated that your boyfriend cannot take on the mortgage in his own name.

As such, you will be responsible for making the mortgage payments as much as your boyfriend. This then means that the transfer would be subject to Stamp Duty if the value of the transfer exceeds £125,000.

You have said that the property is in negative equity and as such there is no equity to buy, so I would suggest that the consideration (amount being paid to buy equity) would be nil, therefore, if the mortgage is less than £250,000 you will not incur Stamp Duty, you solicitor will be able to confirm that this is the case.

With regards to contracts, any agreement that you make between yourselves will not have a bearing on your contact with the mortgage company and once you are subject to the mortgage you become joint responsible for the total debt and the total amount of the monthly mortgage payment. The mortgage contract will over-ride any private agreement that you create.

If you have a question for Tony, go to the myfinances.co.uk Ask the Mortgage Expert section.

Or for more information or mortgage advice go to Mortgage Meadow.

Mortgage Meadow is an independent mortgage broker and is authorised and regulated by the Financial Services Authority.