Shared mortgage, house in negative equity, what to do!

bee_l

I am new to boards, but wondering if anyone has some advice! I have looked through other threads and hope that I am not duplicating a question already answered.

My partner bought a house with a family member approx 5 years ago. As in many cases, the house is in negative equity, with over 200k outstanding on the mortgage.

The family member has recently gotten engaged, and has asked my partner to take over the mortgage. He has hinted that he wants to be reimbursed for payments he has made on the house to date. Would capital gains cash be an issue? What would be involved in either person taking over the mortgage?

He is basically asking for the money he has paid back!
As the house us un neg equity this us obviously not an option, but could anyone shed some light on how to resolve the situation?

My partner could cover the full mortgage payments if necessary.
Many thanks for all/any comments and advice

The ultimate goal is for myself and my partner to buy/build a house together, so future credit is also an issue. The house in question would not be suitable as our future home.

Hunchback

the extent to which the family member reimburses your partner is in my opinion contingent on your partners intentions regarding sale of the property. ( morally anyway ).

for example, in my opinion, if your partners' intention is to sell the property in the next few years ( hell, maybe even the next 15 years ), he/she is going to realise the full burden of the negative equity.

so i guess it seems reasonable for the family member to take this into account and reimburse your partner for half of the negative equity at the time of the mortgage being fully signed over.

i do think however, that an honest and open and fully frank discussion will be more rewarding than just hinting, and implying

hope that makes sense, i am as far from an expert as can be

bee_l

Sounds like good advice, oh I totally agree about the open discussion, but want to gather as much information and advice beforehand.

Thanks

chillywilly

IMO your partners family member seems to be taking the piss. He expects to walk away from a property which in negative equity and be paid back what he has put in? How? That makes no sense to me!

bee_l

Completely taking the piss... But just trying to figure out the logistics of it either way! As in how it works if one person wants out.

ResearchWill

Depends was the family member helping them buy the house, or was the family member getting involved in an investment with eyes wide open. If the second one is the case then legally the options are sell the house and each agree to pay half of what's left due to the bank, or get house valued say bank owed 200000, house worth 150,000 then each of them liable for 25k so if person wants out now and if bank will agree, then he pays 25k gets name off property. the biggest problem will be the bank they are usually slow to leave any Mark off the hook.

bee_l

Eyes wide open, the both lived there for a few years.
Great to know, thank you for all your help.

Basically neither one has anywhere near the money to pull out, so I suppose it's time to contact the bank and discuss it with each other..

quozl

I'd also be VERY careful about figuring out half the current negative equity, getting your partner's relative to pay it, and then accepting sole liability for the property.

Unless your partner is planning to live there permanently, or is able to make up the short-fall and sell now, then they also need to worry about possible future increases in negative equity.

For example, it wouldn't be a great idea to take responsibiliy for say 25 of currently 50k negative equity, and then for example, all of a future 50K of negative equity. With those example figures they'd be taking 75K of negative equity to the other persons 25k.

The only options I'd be interested in personally is selling the property right now and making up the short-fall between the two of you. If you can't, and therefore cannot sell as you are unable to clear the mortgage, your partner would be a massive fool IMO to accept liability for the whole future of this property, assuming that things are as you said and they both went into this as equal partners.

daveyboy_1ie

Your partner’s family member has invested money. This investment has lost its value.

He/ she can walk away with paying their half of the negative equity and your partner can take on the full mortgage (with or without you of course, although the banks may demand two people) or they can both sell the house and equally take on the negative equity balance. To seek reimbursement on something which is effectively worthless is either very naive, stupid or incredibly brazen. Either way they will not be able to be compensated, unless your partner is equally naive and offers such compensation.

Dades

Yes, unless your partner has the wish to take over a house in negative equity - and likely to become even more so over the next couple of years the only option is to sell.

Even if the family member agrees to pay half the current negative equity, you'll need to put the house on the market to obtain the true extent of the debt. Otherwise, based on what we know of that family member, some pie-in-the-sky current value will be offered by them (or an optimistic estate agent).

For me it's a case of everyone in, or everyone out.

PhoenixParker

Was there any agreement drawn up when the house was bought?
What did it say?

What were they going to do if the house had gone up in value?
Apply the same principles to it going down in value.
I'd suggest getting the house valued and looking at comparable houses in the area to start working out a current value number too.

subway

tell him you would love to refund him but, in case he hasnt noticed, he has been paying the bank, not your partner. therefore, he should approach the bank and ask for his mortgage payments to be refunded in exchange for his share of the house.

let us know how he gets on

other otpion would be for him to contact the person he bought it off to let them know he has changed his mind and would like a refund

jackbetal

I'm afraid that your partners brother will want to start waking up to reality and realising that he will have to take a huge hit if he wants to make any sale on the market at the moment. There will have to be some type of risk equalisation worked out by the government soon whereby the banks take their share of the negative equity. As it is people are totally screwed.

NewFrockTuesday

subway wrote: »

tell him you would love to refund him but, in case he hasnt noticed, he has been paying the bank, not your partner. therefore, he should approach the bank and ask for his mortgage payments to be refunded in exchange for his share of the house.

let us know how he gets on

other otpion would be for him to contact the person he bought it off to let them know he has changed his mind and would like a refund

LOL, v funny

Inishowen lady

:eek::eek::eek: How incredibly selfish of your OH's brother/sister to request this, seriously they have their head in the clouds? They need a reality check.
As the ad's say "the value of your investment may go up or down" They (& I) took the gamble and it didn't pay off.

The_Conductor

bee_l - unless either your partner or their family member have some emotional attachment to the property and wish to hold onto it- the best advice anyone could give you- is to sell the property, realise the loss and apportion the loss to both parties. Its not uncommon at the moment for this to happen.

Note- regardless of how bad you think property prices are- until you actually manage to find a buyer and get them to hand over cold hard cash- the value of the property is nil.

With respect of what might happen to property prices- Morgan Kelly of UCD reckons that property prices could fall to half of their current levels, over the next decade.

The suggestion that your partner should refund/reimburse the payments their family member has made towards the property since it was bought- is laughable- and the person who suggested it has a severe Walter Mitty complex....... Not only are they not getting their money back- they owe half of the outstanding negative equity on the property- the extent of which can only be ascertained by selling the property (but is almost certainly at least a 55-60% reduction on the worth of the property in 2006- and falling at perhaps another 1-1.5% per month).

Shane

f9710145

You can bet the family member wouldn't be offering to walk away for just the amount they paid in if the property had gone up €300k in value. In the case of an increase it woudl be sell and split the proceeds, should be the same here. If they still owe money to the bank afterwards then they jointly owe it.

lomb

Another option no one has mentioned, is that both carry on paying the mortgage in full and then the property is rent back to you partner who pays a rent to the partnership who owns the property. This is a fair solution too.
If the other family member wants to pull out then he cannot as both are joinly and fully liable for the full balance so the only way either can pull out is to repay the loan in full and split the losses and walk away.

Marcusm

OP, you need to provide a little more information. Has the joint purchase been documented that way with the property registered in both names and a joint mortgage drawn down in both names? This is important as if this is the case, the relative will not be able to get his wishes even if your partner agreed. With a joint mortgage, both buyers are liable for 100% of the loan, not 50% each. This would be an important point for the family member to understand, irrespective of what course of action you ultimately decide to follow.

Conversely, if the family member has provided capital but is reflected neither on the property registration nor on the mortgage, he will have no liability. This is equally important, if the mortgage was granted to your partner alone with the family member undisclosed in the background, she will have had to make a statutory declaration that no one else had an interest in the house which would make the position with the family member more fraught.

modmuffin

My thoughts exactly, if your partner wants to keep living there for a couple of years

Say mortgage repayments are €1200 p/m, 600 each

Check current rent for the estate/area, say €1000 p/m, knock 10% off the advertised rates, giving them an expectation of €900 p/m

Your partner could then "rent" the full property, meaning the relation will be out of pocket for his share (in the example above this is €150 p/m)
If this was the solution it would be advisable to do regular reviews of the rental expectation

stek1980

Hi,
I have read through this post as I too am in a similar situation and were I bought a house with my ex 2 yrs ago, they have moved out 1yr ago and stopped paying the mortgage. The house is now in negative equity with recent times, I have been trying for 6 months now to get my ex off the mortgage and deeds but the bank are not helping at all, I have been approved for the mortgage but because of the negative equity they won't go ahead with it. So were now at an impass were my ex's solicitor is sending me letters demanding the money for the house but her name has not been taking off the mortgage so she can still lay claim to half the house. Anyone else in this situation or know anyone in this situation would be a great help to hear there story or advice,

Thanks everyone n hope I didn't bore ya too much

The_Honeybadger

So your partners sibling expects to walk away from the negative equity and be repaid for what they have put into the house, je**s christ, he / she is either financially retarded or completely and utterly selfish in trying to saddle your partner with this millstone, perhaps it is a bit of both. Tell him or her that it ain't happening, it is your partner who should be compensated for being left with an ne debt, otherwise sell up and take the hit between them.

Zamboni

stek1980 wrote: »

Hi,
I have read through this post as I too am in a similar situation and were I bought a house with my ex 2 yrs ago, they have moved out 1yr ago and stopped paying the mortgage. The house is now in negative equity with recent times, I have been trying for 6 months now to get my ex off the mortgage and deeds but the bank are not helping at all, I have been approved for the mortgage but because of the negative equity they won't go ahead with it. So were now at an impass were my ex's solicitor is sending me letters demanding the money for the house but her name has not been taking off the mortgage so she can still lay claim to half the house. Anyone else in this situation or know anyone in this situation would be a great help to hear there story or advice,

Thanks everyone n hope I didn't bore ya too much

Don't take that mortgage on by yourself you crazy man!
You're ex is jointly liable for that mortgage and the NE that comes with it.
Get your solicitor to send her letters to start paying her half of the debt.
The nerve of some people. Seriously.

JDD

The first thing to do is figure out the full cost of the house. That includes the mortgage including the deposit, legal fees when buying, building insurance over the years, any maintanence fees, furniture and any money paid to do up/make repairs. Then figure out how much each person has contributed to those costs.

Whatever the split ends up being (let's say 50/50) then each owner has a liability for 50% of the negative equity. I would not be paying anything at all to your partner's family member, as no profit has been realised on the house so far. Your partner's family member should note that the bank may not let his name come off the mortgage, even if your partner could afford the full mortgage. Your partner would have to have an income that would allow the bank to approve the full mortgage amount, which in this day and age may not be the case.

Your partner and the family member should draw up a contract stating that if/when the house is sold down the line, the family member will get a certain amount of the profit (if any) proportional to their ownership of the house at the time of the sale (it'll be less than 50% by the time the house is sold if your partner is making the full mortgage payments).

It may take some time before the house can be sold without the negative equity. Your partner might consider putting a clause in the contract stating that she can sell the house after a certain amount of time (5/7/10 years?) and the family member may still be liable for a certain amount of the negative equity proportional to their ownership of the house at that time.

Really, the best case scenario for your partner is not to let the family member come off the mortgage at all. The bank may take that decision out of your hands anyway. The family member still gets a benefit from coming off the mortgage, as it appears him and his fiance are planning to buy their own house in the future - any application for a second mortgage would now be unencumbered by the negative equity on the present property. Really, that's all he should be hoping for.