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Assuming a Mortgage

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  • 08-01-2016 4:22pm
    #1
    valoren
    Registered Users Posts: 5,479 ✭✭✭


    My wife purchased a property with her sister in 2008 (before we met).
    The mortgage was 225k and there is currently outstanding balance of 186k.

    We both find ourselves at an impasse.

    I am a first time buyer and I currently co-habit with my wife in the property.
    Her sister, who is 10 years older than us both and single with no dependents, has moved to her parents house since we got married a year ago.

    They both still pay the mortgage. I also contribute to my wife's share of this repayment.

    I have offered to buy them both out of the house at the current market value. My wife is in favour of this arrangement. Her sister was positive towards this arrangement. They would both cover the negative equity and would both be mortgage free.

    The house was initially valued at between 150 and 160k, considering the work they had done on the house.

    I arranged a valuation of my own and this was conservatively valued at between 130 and 140k. So quite a discrepancy. Other houses for sale in the intervening months have been given a similar asking price.

    My wife's sister subsequently dug her heels in and is adamant that she will only sell for 160k. (thus leaving neg equity of 13k between them both and not 24k each).

    I am now considering the option of taking over her as the joint mortgage holder. Is this even possible? Is it crazy to assume a mortgage that is in negative equity?

    Any advice appreciated.


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    #2
    Butters1979
    Registered Users Posts: 1,164 ✭✭✭Butters1979


    This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

    Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.


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    #3
    SarahMollie
    Closed Accounts Posts: 2,843 ✭✭✭SarahMollie


    valoren wrote: »
    My wife purchased a property with her sister in 2008 (before we met).
    The mortgage was 225k and there is currently outstanding balance of 186k.

    We both find ourselves at an impasse.

    I am a first time buyer and I currently co-habit with my wife in the property.
    Her sister, who is 10 years older than us both and single with no dependents, has moved to her parents house since we got married a year ago.

    They both still pay the mortgage. I also contribute to my wife's share of this repayment.

    I have offered to buy them both out of the house at the current market value. My wife is in favour of this arrangement. Her sister was positive towards this arrangement. They would both cover the negative equity and would both be mortgage free.

    The house was initially valued at between 150 and 160k, considering the work they had done on the house.

    I arranged a valuation of my own and this was conservatively valued at between 130 and 140k. So quite a discrepancy. Other houses for sale in the intervening months have been given a similar asking price.

    My wife's sister subsequently dug her heels in and is adamant that she will only sell for 160k. (thus leaving neg equity of 13k between them both and not 24k each).

    I am now considering the option of taking over her as the joint mortgage holder. Is this even possible? Is it crazy to assume a mortgage that is in negative equity?

    Any advice appreciated.

    They both pay the mortgage yet your wifes sister gets no use from the property. Firstly I think she is being hard done by on this alone, unless there is more that you havent told us.

    Anyone selling a house is entitled to dig in and get the price they want at the risk of not selling.

    Are you mortgage approved to buy the sister out or is this all just talk at this point?


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    #4
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    There's a very good chance that the bank simply won't allow you to swap your name out for hers. Instead they'll want you and your wife to take out a new mortgage in both your names and your sister-in-law and wife to stump up 13k each to clear the negative equity. In effect you and your wife would "buy" the house from your wife and sister-in-law.

    In any case, the bank will perform a complete re-evaluation of your financial situation, including a valuation of the property. If the valuer does not agree that the property is worth €160k then nobody is going anywhere.

    If you are happy to go with your original plan of buying them both out @ €160k, then you can give that a go. Worst case scenario is that the bank valuer refuses to value it at this level and you have to go back to the drawing board.


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    #5
    Butters1979
    Registered Users Posts: 1,164 ✭✭✭Butters1979


    SarahMollie makes a good point also, although it sounds like the house would not sell at the sisters expectations.

    Could you just take over her side of the mortgage? Buy her out for what she's paid and then you and your wife take full ownership?


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    #6
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    SarahMollie wrote: »
    They both pay the mortgage yet your wifes sister gets no use from the property. Firstly I think she is being hard done by on this alone, unless there is more that you havent told us.

    Anyone selling a house is entitled to dig in and get the price they want at the risk of not selling.

    Are you mortgage approved to buy the sister out or is this all just talk at this point?

    I am mortgage approved but her sister has essentially moved out of her own accord.
    She has not spent any time in the property for months, hence the proposal from me to buy the property from them both.


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    #7
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    Butters1979 wrote: »
    SarahMollie makes a good point also, although it sounds like the house would not sell at the sisters expectations.

    Could you just take over her side of the mortgage? Buy her out for what she's paid and then you and your wife take full ownership?

    That's my current thinking. Taking over her share, on the existing mortgage.

    Seamus makes a good point above - would I actually get a mortgage as a FTB on a property that is overvalued as per the current market itself. It would be a risk for the bank. I had not thought of that.


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    #8
    SarahMollie
    Closed Accounts Posts: 2,843 ✭✭✭SarahMollie


    valoren wrote: »
    I am mortgage approved but her sister has essentially moved out of her own accord.

    She has not spent any time in the property for months, hence the proposal from me to buy the property from them both.

    Have you thought about your wife and sister continuing to hold the mortgage evenly, but you and your wife pay the market rent on the property?

    Right now it seems like the sister is paying 50% of the mortgage, with you and your wife paying 50% between you, and getting 100% of the beneficial use of the property.

    I know its artificially juggling money between some of the same ppl, but this way the sister is getting her share and everything is fair.

    Buy out seems unlikely unless the official valuation matches the sisters expectations, so this may not be an option.


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    #9
    SarahMollie
    Closed Accounts Posts: 2,843 ✭✭✭SarahMollie


    valoren wrote: »
    That's my current thinking. Taking over her share, on the existing mortgage.

    Seamus makes a good point above - would I actually get a mortgage as a FTB on a property that is overvalued as per the current market itself. It would be a risk for the bank. I had not thought of that.

    Do you have any cash savings so that the amount you borrow is more equal to the value of the share of the property you'd be buying? Or are you looking to borrow the full amount?

    The latter is highly unlikely in my opinion.


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    #10
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    Butters1979 wrote: »
    This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

    Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.

    She has said she will not take on the mortgage on her own, buying out my wife's share. It's not an option. That's completely understandable.

    She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).


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    #11
    SarahMollie
    Closed Accounts Posts: 2,843 ✭✭✭SarahMollie


    valoren wrote: »

    She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).

    I get that its unfair to expect her to take over the whole mortgage but equally, i don't think she should be able to block it being rented out if that the most financially prudent option.

    However if you do rent it out, have you even considered the tax implications? BTL for PAYE workers is not great.

    Also, how do you feel about the house? Is it the type of place youd like to live or are you only there out of circumstance?


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    #12
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    SarahMollie wrote: »
    Have you thought about your wife and sister continuing to hold the mortgage evenly, but you and your wife pay the market rent on the property?

    Right now it seems like the sister is paying 50% of the mortgage, with you and your wife paying 50% between you, and getting 100% of the beneficial use of the property.

    I know its artificially juggling money between some of the same ppl, but this way the sister is getting her share and everything is fair.

    Buy out seems unlikely unless the official valuation matches the sisters expectations, so this may not be an option.
    SarahMollie wrote: »
    Do you have any cash savings so that the amount you borrow is more equal to the value of the share of the property you'd be buying? Or are you looking to borrow the full amount?

    The latter is highly unlikely in my opinion.

    Prudently, I would pay the current market price of 130k.

    With regards to the 50/50 split, my wife is currently unemployed and I am contributing to her portion.


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    #13
    Tiddlypeeps
    Closed Accounts Posts: 2,103 ✭✭✭Tiddlypeeps


    Thread very carefully here. If anyone walks away from whatever arrangement you come to feeling hard done by then it could easily cause people to fall out with each other. Nothing makes people fall out quicker than money. Whatever arrangement you end up coming up with make sure before you follow through that all parties involved don't feel like they are getting the short end of the stick.

    It's such a messy situation that the cleanest thing to do is probably to buy elsewhere and you and your wife move there. Then rent the old house so your wife and her sister can use the rent to clear the mortgage and when out of negative equity sell up. You might be attached to the house you are in, but is it really worth the potential fallout if things don't work out.

    Or you could offer to pay the sisters side of the mortgage every month as a form of rent for using her half of the house until the negative equity is cleared, then you might have a better chance of buying out her share without much chance of fallout.

    If the sister is left with a large chunk of negative equity to clear on a house she hasn't even been living in for the last year but has been paying the mortgage on anyway then it is probably going to at best leave a sour taste in her mouth.


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    #14
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    SarahMollie wrote: »
    I get that its unfair to expect her to take over the whole mortgage but equally, i don't think she should be able to block it being rented out if that the most financially prudent option.

    However if you do rent it out, have you even considered the tax implications? BTL for PAYE workers is not great.

    Also, how do you feel about the house? Is it the type of place youd like to live or are you only there out of circumstance?

    The house is adequate for our current needs but I wouldn't see ourselves living there with a large family. I would envisage moving after 10 years or so to a larger home.


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    #15
    Tiddlypeeps
    Closed Accounts Posts: 2,103 ✭✭✭Tiddlypeeps


    valoren wrote: »
    She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).

    Sorry only saw this after I posted the above. Has she said why she doesn't want to rent out the property?


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    #16
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    Tiddlypeeps wrote: »
    Sorry only saw this after I posted the above. Has she said why she doesn't want to rent out the property?

    She doesn't want to be a landlord.


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    #17
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    That's a really stick position to be in OP, I don't envy you.

    Personally I'd be looking to either leave the house as jointly owned by the sisters (and rent it out) or I'd put it on the market.

    Anything else just leaves you wide open to all sorts of accusations in years to come whenever the property does increase in value.

    Added:

    Sounds like the prudent option would be to sell up.


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    #18
    Tiddlypeeps
    Closed Accounts Posts: 2,103 ✭✭✭Tiddlypeeps


    valoren wrote: »
    She doesn't want to be a landlord.

    Using a letting agent would take 99% of the work out of it, and you could assure her that you and your wife will handle any of the other 1% of issues that pop up.


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    #19
    dori_dormer
    Registered Users Posts: 1,919 ✭✭✭dori_dormer


    Also ou should be aware that since you are married and your wife owns a property you are not considered a first time buyer. That may change your calculations a bit!

    The fairest way to split the mortgage currently is you and your wife pay the current rent and the sister tops up to cover the mortgage. Or even fairer really is you two pay the current rent + 50 % of what's left over. As technically that's all the sister would be paying into it if it was rented to someone else. The sister might be nicer and do the first option since your wife is unemployed.

    If you say you are thinking of moving out then the sister only has the option of renting or selling. Personally I wouldn't get money involved with family and I think you two should look at buying elsewhere. The sister will always feel hard done by and like you got a good deal if you buy her out ( whatever the complexities of that may be)


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    #20
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    dori_dormer wrote: »
    Also ou should be aware that since you are married and your wife owns a property you are not considered a first time buyer. That may change your calculations a bit!

    The fairest way to split the mortgage currently is you and your wife pay the current rent and the sister tops up to cover the mortgage. Or even fairer really is you two pay the current rent + 50 % of what's left over. As technically that's all the sister would be paying into it if it was rented to someone else. The sister might be nicer and do the first option since your wife is unemployed.

    If you say you are thinking of moving out then the sister only has the option of renting or selling. Personally I wouldn't get money involved with family and I think you two should look at buying elsewhere. The sister will always feel hard done by and like you got a good deal if you buy her out ( whatever the complexities of that may be)

    My wife bought the house before we met. I have never owned a property.
    Am I not considered a first time buyer?


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    #21
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    valoren wrote: »
    My wife bought the house before we met. I have never owned a property.
    Am I not considered a first time buyer?
    Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

    Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.


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    #22
    valoren
    Registered Users Posts: 5,479 ✭✭✭valoren


    seamus wrote: »
    Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

    Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.

    Yes, I would be making any mortgage applications in my own name.


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    #23
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    In that case, it's still worth noting that the deposit rules are minimums rather than obligations. That is, while you might qualify for a 10% deposit under the mortgage rules, the bank can still choose to require a 20% deposit from you for affordability purposes.


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    #24
    Cuddlesworth
    Registered Users Posts: 13,995 ✭✭✭✭Cuddlesworth


    Tiddlypeeps wrote: »
    Using a letting agent would take 99% of the work out of it, and you could assure her that you and your wife will handle any of the other 1% of issues that pop up.

    Until you get problem tenants. And with a property worth 130, I doubt rents would cover mortgage and costs, let alone damages if needed.


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    #25
    Explosive_Cornflake
    Registered Users Posts: 2,124 ✭✭✭Explosive_Cornflake


    seamus wrote: »
    Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

    Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.

    Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
    Would I be a first time buyer or not if I went to purchase a house?


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    #26
    dori_dormer
    Registered Users Posts: 1,919 ✭✭✭dori_dormer


    I'm sorry but I believe what seamus says is incorrect. If you are married to someone who owns or previously owned a property, you also lose your first time buyer status. Whether they are involved money wise with the purchase of the property or not . Just like when your wife sells her place. You will be involved by having to declare that you allow the family home to be sold.


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    #27
    PhoenixParker
    Registered Users Posts: 2,677 ✭✭✭PhoenixParker


    Explosive_Cornflake wrote: »
    Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
    Would I be a first time buyer or not if I went to purchase a house?

    If you haven't drawn down a mortgage in the past then some banks treat you as a first time buyer even if you've owned property.

    Since you've inherited yours, it may even be all banks.

    Married couples get the worst case scenario of either party, so if one has purchased a property with a mortgage before then neither of you are first time buyers.


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    #28
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Explosive_Cornflake wrote: »
    Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
    Would I be a first time buyer or not if I went to purchase a house?
    For the banks' purposes you're a first-time buyer because you've never had a mortgage on a property.

    Under Revenue definitions, you are not a first time buyer. But that's not longer relevant anyway.


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    #29
    Jen44
    Registered Users Posts: 455 ✭✭Jen44


    Butters1979 wrote: »
    This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

    Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.


    you will not be considered FTB as your wife has already bought a house. I had this with my husband I had already bought a house and when we bought together he was not considered a FTB as I already had purchased a house!


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    #30
    ct5amr2ig1nfhp
    Closed Accounts Posts: 5,019 ✭✭✭ct5amr2ig1nfhp


    As other posters have said, you are in a very messy situation. I would stay well clear of this situation based on previous experience, especially when family is involved.

    If the sister has moved to the parents house and is happy to continue paying the mortgage, why would you want to assume the mortgage anyway? I think it's a win for you and your wife.

    Unless the sister is unhappy of course or feels she has been forced out of her home.


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    #31
    [Deleted User]
    Posts: 24,714 ✭ [Deleted User]


    Jen44 wrote: »
    you will not be considered FTB as your wife has already bought a house. I had this with my husband I had already bought a house and when we bought together he was not considered a FTB as I already had purchased a house!

    I think the op is suggesting not buying with his wife but buying completely alone with no input or mention of his wife.


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