Buying your partner out from the property

shabaz

Can someone give me abit of advice, myself and my partner have broken up 2 months ago, I am living in our house which we both bought together, and I have 2 tennats in helping me with the mortgage, which my ex is agreeing with until the market gets better and we can sell. He did say to me that I could buy him out if I wanted to, but how does that work eg: if the mortage was 250 and the house is now worth 370, do i have to pay him half of the 370 or is it only the amount we have gained on it eg: 250 minus 370 120 which is the profit we would have made and then Id owe him half of that?
Dose anyone know what way it is done, I am going to see the bank next week so will get the advice but was just wondering is there anyone who might know anyway.

Thanks a mill.

hopalong_ie

Hi,

You would buy him out for the current market value of the house, so
if your mortage was for 200k and the house worth 400k then you would need to buy his 100k of the mortage and his have of the profit he has made i.e another 100k.

As you have tenants in paying rent, well it's half his property so he would be entitled to half that rent as i would see it. You would have his name taken off the mortage assuming the bank approves and then the deeds and others such as insurance.

The_Conductor

For arguments sake:

Property purchased for 250k with a 100% mortgage of which 240k is outstanding. Half that debt is his. (120k)

Property has a current nominal sale value of 370- of which half that equity is his. (185k)

So- there is now 130k equity built up in the property, over and above the outstanding mortgage (Equity-debt= 65k)

In short- if you wish to take on the whole mortgage and have him walk away it entails a payment of 65k into his hands, and you taking over the whole mortgage.

Be very careful with your valuation- as property prices are falling rapidly, just because it was valued at 340k a few months/weeks ago, does not mean it would achieve this price at auction.

Ps- you can't just take his name off the mortgage- its a whole new mortgage and the property would have to be re-registered in your name (there is no stamp-duty implication in this transaction). You will have to confirm that the bank are willing to lend you the 240k (amount o/s on the mortgage at present) + the 65k to pay him off = ~ 300k

As for the current situation- the people renting the house are a joint tax liability on both your parts, until the transaction is complete- you are legally obliged to make an annual tax return reporting your portion of the income (you as resident in the house will qualify for the rent-a-room scheme, he, as no longer resident in the house, will not qualify- so all his rental income is taxable income).

lushballs

If you remortgage and take the other persons name off the deeds are you not liable for stamp duty

The_Conductor

lushballs wrote:

If you remortgage and take the other persons name off the deeds are you not liable for stamp duty

No, not if you were a First Time Buyer when you purchased the property together in the first instance. If you were not a FTB- yes, you would have a stamp duty liability.