Splitting up and avoiding negative equity?
Wednesday, 22 October 2008 04:17
A reader from Rugby is splitting up with his partner, but wants to hold on to their home until the property market turns.
Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes him through the problem and what it means to his finances.
Darran from Rugby asks:
I have recently split with my fiancée and we both have a mortgage which is now in negative equity. I have suggested selling the house and making a loss but my ex wants to keep onto the house, she has been declined by our mortgage lender to take the house on herself and wants me to keep my name on the mortgage until it rises in value.
She says I do not have to pay towards the mortgage and just wants me to keep my name on the house for x amount of years.
Is there any way a solicitor can draw up a legal agreement to this effect, giving me a percentage of profit in x years time while protecting me from late payments etc?
Tony replies:
The simple answer is yes.
A solicitor will be able to draw up an agreement between you that will define how the equity is split on sale, any special conditions regarding the sale (who can enforce a sale, under what terms and what notice), your agreement could specify that your ex is responsible for all the costs (including mortgage) incurred for the property.
However, the mortgage company will not recognise the agreement and you will still be bound by their terms and conditions, which means that you will remain equally responsible for meeting the mortgage payments. You should be able to arrange with the lender for you to receive copies of statements and correspondence, so that you can remain aware of the conduct of the account.
You should also discuss the ownership of the property, it is common for married people to own property as Joint Tenants, this means that should one owner die the ownership automatically reverts to the remaining owner. By changing the ownership to Tenants in Common, upon death the portion of the property owned by the deceased forms part of their estate and is dealt with in line with the deceased's will, that way the sale or transfer of the property can be carried out in line with the agreement you are looking to create.
Remaining on the mortgage will affect any other mortgage application that you wish to make, so there will be a significant impact on your ability to buy a home whilst you are owner and joint borrower on this property.
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
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