Stuck in joint mortgage with friend...

[Ezdezat]

@EZDEZAT

The proposal is the same. Its basically a split mortgage. A portion of the mortgage is being deferred until a further date.

I don't think you can say that a Solicitor or Accountant or Financial Advisor is the right category of person to employ. You need a good negotiator and someone who understands banking inside and out.

And by the way, of course the bank's opening line will be "No, it cant be done" but that's what negotiation is all about. You both start from an extreme position and come together through agreement.

The big mistake that I see all the time is that Debtors are too quick to accept the bank's position. The bank is only looking after its own interests. Its up to you to protect yourself from anything that is unfair or unreasonable. In days gone by, there was a general feeling that the bank was on your side and there to help you. Those days are long gone. The bank is working in its own interests ALWAYS.

Tks, this is definitely an avenue I will explore. I have been reluctant to approach an accountant due to the fees. After a quick look online it can cost 1000's to have a practitioner act on your behalf. I may look at tackling it alone, I have some negotiation experience though never in this capacity.
The actual figures I will need to look at in more detail, again if I contribute for 5 yrs and he doesn't, we would need to agree on the future share of equity in the property.
Again as you rightly point out, maybe me covering the full repayments to preserve my credit score is not such a bad idea, if we can agree on a future equity share.

 

[Dr.Debt]

Finally, something that some people overlook in this type of situation, involving a jointly and severally liable loan - where one of the debtors satisfies the debt on his own, because the 2nd debtor is unable to do so, then the 1st Debtor can enforce a claim against the 2nd debtor and seek a contribution in compensation.

So in plain English, if you pay more than your share of repayments , then at the time of selling the house OR if the 2nd Debtor comes into money, there is a legal remedy
for you to recoup the excess paid, from the 2nd debtor.

 

[Ezdezat]

Finally, something that some people overlook in this type of situation, involving a jointly and severally liable loan - where one of the debtors satisfies the debt on his own, because the 2nd debtor is unable to do so, then the 1st Debtor can enforce a claim against the 2nd debtor and seek a contribution in compensation.

So in plain English, if you pay more than your share of repayments , then at the time of selling the house OR if the 2nd Debtor comes into money, there is a legal remedy
for you to recoup the excess paid, from the 2nd debtor.

Even while you have put forward some good ideas, thinking about it, a split mortgage or reduced payment plan is just kicking the can down the road. Sure we may have more money to spend now, but it will take a lot longer to bring the house back to positive equity. We could potentially have the same issue in 5 years time.

Here's to hoping house prices recover, quickly. I won't hold my breath.

 

[Importer]

Well, thats what all mortgages are, kicking the can down the road because you cant pay the full amount now.

Sometimes the can is kicked down the road 20 years, sometimes 30 years and sometimes even 35 or 40 years.

I cant see the huge problem in your case if the can is kicked down the road
an extra couple of years if it fixes your immediate problem

 

[Ezdezat]

Indeed! Although I do hope to get out of this situation, sooner rather than later! I appreciate I'm going to have to rent with my gf for a long time, but i would like to think that by the time I'm 40, there may be some light at the end of the tunnel! Some of the capital paid off, house prices rising a little, some savings built up.

To that end i have one last question of people and i'll close the thread! By the way everyones input has really helped to explore the options, and it's much appreciated!

From a pure finance point of view - if i could come to agreement with my friend that any extra i pay i can try to recover from the equity down the line - would it be better to go with a revised payment option where i pay an additional 200 on top of the rental income?
Or would it be better to try to pay the full 400 shortfall myself, and meet the full repayments? My thinking being that this may be the better option as it would reduce the capital owed more quickly? I do think i could afford the full €400, particularly when my credit card & loan is cleared it would be no problem.

 

[Lucuma]

So you're willing to pay 400 per month til the house comes back into equity, and what you want in return for that is to be entitled to as much of that equity as possible.

Sounds awfully like Option 1 ;-)

 

[Ezdezat]

So you're willing to pay 400 per month til the house comes back into equity, and what you want in return for that is to be entitled to as much of that equity as possible.

Sounds awfully like Option 1 ;-)

When you put it like that
Although the way I would put it - I'm willing to pay 400 per month until such time that the other parties financial situation is such that he can also start to contribute. A 30 yr mortgage is a long time and there is every possibility that could happen!

 

[TrebleT]

I'm sorry but if the mortgage is 1250.00, rental is 850.00 then you and your friend only have to come up with 200.00 each for the shortfall surely he can afford that?
He seems to have smaller debts the you so I think finding 200.00 would be pretty easy for your friend...sounds like he is trying to pull a fast one having you pay everything and he will reap the benefits down the line.

 

[Ezdezat]

I'm sorry but if the mortgage is 1250.00, rental is 850.00 then you and your friend only have to come up with 200.00 each for the shortfall surely he can afford that?
He seems to have smaller debts the you so I think finding 200.00 would be pretty easy for your friend...sounds like he is trying to pull a fast one having you pay everything and he will reap the benefits down the line.

There's some merit in what you're saying alright. I've kind of come to the conclusion though that that's just the way he is, and am trying not to take it personal. I am the type that pays all my bills in full every month and live on what's left. He's the type that tries to keep his outgoings low so he can have a better social life. I can't change him unfortunately...

 

[Ezdezat]

To update a bit on this situation. We had agreed to go with Dr. Debts tact, basically we propose to the bank that i pay exactly half of everything, and request that they 'park' his part of the mortgage. Everything is ready to go - cover letter, bank statements, SFS, etc. In the meantime, the other party has been advised his temporary employment contract will not be renewed.

However, having calmed down a bit, I am now strongly considering taking on the mortgage, in full, myself. It will cost me €400 per month approx, but eventually I will have a house to show for it. I will be in control, I can protect my credit rating. A €400 outlay each month will be tight, but it won't be forever, I expect my earnings to go up, my unsecured debts will decrease over time, I expect rental rates will eventually increase a bit. We have good tenants in who look likely to stay there for a long time. Myself and my gf can rent until such time we're in a position to buy again, we're still relatively young.
My friends situation isn't looking likely to improve any time soon, so keeping him involved while I will be liable for the lions share anyway, isn't a great option. I suppose it could be worse - at least I have benefited from him taking half of the costs to date, rather than if I had bought on my own initially (the initial costs & deposit, furnishing the house, etc.). We've both put about 20k in each so far.

Before I pursue this avenue further, just some further questions, all opinions welcome, some people may have experience in similar circumstances;

1) How likely are the bank to sign the house over to me? Would i have to threaten not to pay until the issue of ownership is resolved, to get this to happen? Would this be an expensive process - would the bank try to drawdown a completely new mortgage (i expect at a higher 'buy to let' rate)? Solicitors fees? Stamp duty? Would the arrears be an issue? (about 3k at present i think). I don't have heaps of cash knocking about i can throw at this, and ideally would like to hold onto my small savings as a bit of a 'cushion'.
2) Would it be better to see a solicitor and have a side agreement drawn up, where my friend agrees to forfeit his share of the equity, provided i take on the costs from this point? I could then look at having his name removed from the mortgage / deeds at a later date, when my financial situation has improved? How legally binding would this be?

Just to note, as far as i'm aware my friend would be only delighted to get out of this mess scott free, so I'm sure will sign anything that allows that.

 

[Lucuma]

Back before my ex went totally hostile on me, we submitted an application to have the mortgage transferred solely into my name. All it involves is printing off the forms, both of you signing it, and attach some financial information about your income etc. It is simple to do, and costs nothing. In our case she was earning nothing, was on social welfare etc and I had a good salary etc however the bank turned the application down. I believe this was because to date the mortgage had been paid in full and on time every month so the bank had no reason to want to change the status quo. In your situation, the mortgage is already in arrears, I'd say that will help your case. The bank don't want the current situation to continue like they did with me, and will be more open to talk options. No harm in filling out the forms and sending them off anyway, worst thing that can happen is the bank says no and then you can threaten to stop paying even the rent off the mortgage unless they agree to transfer the mortgage into your name. Have a look at some of the advice given to me on my thread, it applies here.

 

[Ezdezat]

Back before my ex went totally hostile on me, we submitted an application to have the mortgage transferred solely into my name. All it involves is printing off the forms, both of you signing it, and attach some financial information about your income etc. It is simple to do, and costs nothing. In our case she was earning nothing, was on social welfare etc and I had a good salary etc however the bank turned the application down. I believe this was because to date the mortgage had been paid in full and on time every month so the bank had no reason to want to change the status quo. In your situation, the mortgage is already in arrears, I'd say that will help your case. The bank don't want the current situation to continue like they did with me, and will be more open to talk options. No harm in filling out the forms and sending them off anyway, worst thing that can happen is the bank says no and then you can threaten to stop paying even the rent off the mortgage unless they agree to transfer the mortgage into your name. Have a look at some of the advice given to me on my thread, it applies here.

Tks, that's an awful pity, you could have had the whole situation resolved if the bank had played ball? Amazing that being in arrears gives you a bargaining chip.
I spoke to the bank earlier, i explained that the arrears were due to an ownership dispute and not about my ability to repay, and they said they would certainly consider it. In the guys words 'it has been done', and is called a 'transfer of equity', and doesn't cost anything. I suspect there are legal costs however.
I also found a solicitor who seems to know what he's talking about, and advised that if the bank refuses to play ball, he can arrange a 'transfer of ownership', which would be legally binding. All pending the other party being willing to sign the dotted line of course.

 

[Lucuma]

Tks, that's an awful pity, you could have had the whole situation resolved if the bank had played ball? Amazing that being in arrears gives you a bargaining chip.
I spoke to the bank earlier, i explained that the arrears were due to an ownership dispute and not about my ability to repay, and they said they would certainly consider it. In the guys words 'it has been done', and is called a 'transfer of equity', and doesn't cost anything. .

Yes, back then my ex wanted off the mortgage so she could apply for a council house (you can't get social housing if your name is on a mortgage) but we were turned down at the time I think because the mortgage was not in arrears. I think you'll find the best move you ever made was to let your mortgage get into arrears, it gives you so much more options with the bank. At the time that we applied, I had nothing to offer the bank to persuade them to hand the mortgage over to me, now that I have a lump sum saved up to offer them.....the ex has decided not to play ball. Murphy's Law.

Regarding the legal costs yes I believe that in the event of the bank agreeing, your friend agreeing and all being set to go, you have to get a solicitor involved and pay a fee, although I think only a few hundred euro? I'm not sure though.

 

[Lucuma]

Hi Ezdat, just wondering if you continued allowing your salary & savings in same bank as your mortgage after going into arrears? There's no way they could seize part of your salary or savings to pay the mortgage is there?

 

[Ezdezat]

Hi Ezdat, just wondering if you continued allowing your salary & savings in same bank as your mortgage after going into arrears? There's no way they could seize part of your salary or savings to pay the mortgage is there?

Hi Lacuma, sorry haven't been on in a while. State of play on this is that I've applied for a transfer of equity (into my name), currently waiting on the bank to respond. The tact I've taken with the bank is it's either they do that or they'll have to force a sale or repossess, as I'm not going to solely pump money into a property that the other party would have a claim to. So if they don't agree I'm sure I'll find out the answer to your question! Currently they have full visibility of my salary, but not the savings.
Sorry probably doesn't help you...

 

[Bronte]

I also found a solicitor who seems to know what he's talking about, and advised that if the bank refuses to play ball, he can arrange a 'transfer of ownership', which would be legally binding. .

That's very interesting, I wonder how that works?

I do agree that being in arrears is a better bargaining chip with a bank. When the mortgage is being paid on time they have no reason to agree to anything. Arrears tends to focus their minds.

 

[Ezdezat]

That's very interesting, I wonder how that works?

I do agree that being in arrears is a better bargaining chip with a bank. When the mortgage is being paid on time they have no reason to agree to anything. Arrears tends to focus their minds.

It was a couple of months ago now I can't remember exactly what he said, but it was some kind of personal legal agreement between both parties, that would mean that although we are both jointly liable for the mortgage, he could hold me liable for his share if it ever came to it, in return for him relinquishing his interest in the house. Solicitor seemed to think it wasn't a problem - whether it would hold water in 20 years time if there was a dispute, I don't know, I haven't had to examine that option yet!