Buy with friend gone bad - Stop making mortgage repayments?

[burntfingers]

Hi, Bought a house 2.5 yrs ago with friend, relationship soured 14 months ago requested sale of property but co-owner invoked clause in co-ownership agreement requiring min. 2 yrs ownership prior to sale. Value has dropped around 30K in those 14 months and I have spent around 12K on mortgage repayments , have house on market now reasonably priced etc. but v. little interest. I left property in December due to increasingly distressing behaviour of co-owner and am living elsewhere. Given the whole mess, with no prospect of sale in sight any time soon and house plunging into negative equity, am thinking of just stopping paying mortgage on property and posting keys in the door! Any thoughts? Advice? Solicitor has consistently advised continuing to pay mortgage and bills on house even though not living there but just seems ridiculous.

 

[ClubMan]

You seem to have an agreement covering the joint purchase so does it not have anything to cover this issue? Is the other party still living in the property? Could you switch to interest only on the mortgage for the moment?

 

[starlite68]

firstly im sorry to hear you are having problems,but i really think you have to bite the bullet on this one. you are down 12k so far, but in a years time it could be a whole lot more. its ok for your solicitor to say keep paying the mortgage and the bills...he is not the one who has to put his hand in his pocket!
walk away now and get yourself a good nights sleep.

 

[NicolaM]

Solicitor has consistently advised continuing to pay mortgage and bills on house even though not living there but just seems ridiculous.

Hi Burntfingers
Presumably if you stop paying the mortgage you will acquire a bad credit rating (ie will be unable to get another mortgage, should you decide to try and buy again in the next 5 years. This would also lead to you being refused loans etc if you needed any).
You need to sell the house, but be careful not to do anything (eg stopping paying mortgage) that will restrict your future options.
Hopefully you will be able to sell soon. You may need to unfortunately reduce the house price further to try and do this.
Nicola

 

[Blinder]

firstly im sorry to hear you are having problems,but i really think you have to bite the bullet on this one. you are down 12k so far, but in a years time it could be a whole lot more. its ok for your solicitor to say keep paying the mortgage and the bills...he is not the one who has to put his hand in his pocket!
walk away now and get yourself a good nights sleep.

I was very seriously think about the repercussions before following this advice. I think it would be very foolish to act that way. For one thing it will affect your credit rating and impair your ability to get a mortgage in the future. And if the bank then repocesses the house they can still follow you for the difference in the price they sell it for and the mortgage outstanding.

You need to put any problems between yourself and your friend aside and sort this out. Have you offered to buy your friend out? Have you given your friend the option to buy you out?

 

[WaterSprite]

firstly im sorry to hear you are having problems,but i really think you have to bite the bullet on this one. you are down 12k so far, but in a years time it could be a whole lot more. its ok for your solicitor to say keep paying the mortgage and the bills...he is not the one who has to put his hand in his pocket!
walk away now and get yourself a good nights sleep.

But the parties have an agreement covering this - are you suggesting that OP renege on the agreement? The remaining owner may not be able to make the mortgage repayments on his/her own if OP just stops payments. The co-owner isn't preventing the sale now (after the 2 years) so, distressing behaviour notwithstanding, is abiding by the agreement themselves. I think the solicitor's advice is right if that's what the agreement outlines. Plus, if the house is in joint names, if OP ceases payment, it could lead to repossession and all the mess that entails and OP will have their credit rating plunged into the toilet.

OP, if you have to get out now (and I can see why you would want that), perhaps another price drop is in order? Also, if you have enough time, which you may do if the house is taking a while to shift, are you on the best mortgage rate you can be? Can you rent out the room that you left? As Clubman suggests, maybe you could go interest only, rent out the empty room and ride out the current turmoil?

Good luck with it
Sprite

 

[starlite68]

Can you rent out the room that you left? As Clubman suggests, maybe you could go interest only, rent out the empty room and ride out the current turmoil?

Good luck with it
Sprite

waterspirit..what yourself and clubman are suggesting is good advise...but it depends how long it takes to ride out this current turmoil,as you say. which may not be any time soon. what i was suggesting is that given the OP is down 12k already..it may be a good time to cut his losses...its a tough one!

 

[WaterSprite]

I'm not 100% sure about what the "cutting the losses" option entails - writing the whole thing off and giving the other co-owner the house for free and for nuttin'? That could indeed be an option and might be the best one.

Sprite

 

[NicolaM]

I'm not 100% sure about what the "cutting the losses" option entails - writing the whole thing off and giving the other co-owner the house for free and for nuttin'? That could indeed be an option and might be the best one.

That may well not be an option when in negative equity though? (ie the other person might not appreciate getting a 'free' debt, of perhaps tens of thousands, above and beyond the value of the house, which is what that option would mean.)
Nicola

 

[WaterSprite]

That may well not be an option when in negative equity though? (ie the other person might not appreciate getting a 'free' debt, of perhaps tens of thousands, above and beyond the value of the house, which is what that option would mean.)
Nicola

Yep - totally right. Considering the timelines (bought 2.5 years ago), there may well be negative equity.

We probably need more detail from OP about the relationship and what other options they have discussed (such as one party buying the other out, renting out a room etc.) Other than dropping the price, they'll need to turn to old fashioned negotiation (or mediation perhaps, but the sound of it)

Sprite

 

[burntfingers]

Thanks so much for all your thoughts and advice - pretty much my internal dialogue for the last while! I offered to buy out co-owner around 14 months ago and she refused - she came back to me looking for the original offer around ten months ago. The original offer would have netted co-owner 17.5K at that time (obviously no EA costs and would only have been one solicitor involved so about half what sols bill will now be). By the time she was prepared to accept the original offer the value of prop had dropped meaning that her net profit would be 5K max if I paid market value. She refused market value and was still looking for 17.5K net profit from sale of her interest in prop. I withdrew all offers at this point. At the time of the original offer and even when I offered the 5K the sums just about worked out on basis of 95 per cent re-mortgage, would have required around 10K cash to get out. To buy at market value now -i.e. 0 profit (at best) and each party takes their hit on the costs involved in sale - would require 30K in cash to make up shortfall of 90 per cent re-mortgage on outstanding original mortgage (was a hundred per cent mortgage when we took it out - still appears to be hundred per cent ! ). I don't believe either of us has 30K or capacity to raise 30K to get out. Unfortunately, the (abysmal) co-ownership agreement prevents rental of any part of the house without agreement as well. On the PTSB tracker so gearing up for another increase...

 

[car]

Unfortunately, the (abysmal) co-ownership agreement prevents rental of any part of the house without agreement as well. On the PTSB tracker so gearing up for another increase

Does the other party realise that theyre going to be hit by this as well? ie, if the mortgage isnt paid that their credit rating will be affected too.

Can you appeal to a common friend/relation to make her see sense?

Explore the other suggestions here first but while being not nice you could play hard ball about selling or part renting, numerous ways of doing it, if youre in financial straits and needs must, no reason why you should should take all the hit.