in the mire
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Hi folks, I met some friends last week and this is their story below, would any of you have any ideas of a possible solution?
Mary aged 40 and Liz aged 36 (brother & sister) bought a house in 2006 to live in, They got a 25yr 100% joint mortgage for 240K and they are currently paying 750 pm each. Liz got married last month and moved into her husbands house. Husband also has a mortgage on his house. Mary (single)is now living on her own in the house and liz is still paying 750 pm to the joint mortgage. The problem is, liz needs to contribute to her and husbands home bills, mortgage etc but cant afford to while still paying joint mortgage with Mary. They both owe 115K each to joint mortgage and the property is now worth about 160K-170K. So options available
1)Mary takes over paying off the whole mortgage and liz signs over full ownership of the house to Mary, Liz walks away with nothing after paying 5 yrs mortgage. But I think the bank wont be happy with this arrangement as that would be like “ all eggs in one basket” they may prefer to spread risk over both people. Mary is reluctantly saying she will take on full mortgage and will just about be able to afford it. maybe rent out a room for 250pm to help pay.
2) Liz rents out her half for about 250pm which is subject to tax and costs etc.
3)Mary moves out and they jointly rent the whole house for 650pm , But Mary will have rent/share(closer to work) but this could cost say 300 to share or 650 to rent and also loose her TRS of about 80pm
4) sell the house and both take the loss of about 60k-70K and devide it between them and pay off over a long period.
5)Mary and liz have other personal loans of say 10K each to pay off also.
I’m thinking option 1 or 4, with option 4 if they paid off say 35k each over a period of time, wouldn't it work out cheaper than paying off 115K?
Looking at it from Mary's perspective only, the house may be in fact her pension and therefore any transaction must crystalize any loss so as Liz can stop up to the plate.
Sell the house to Mary at say 160 and crystallise the loss for both of them.
Mary can take her half on as part of house mtg and let Liz stick her loss on her hubbies mortgage.
Selling to a 3rd party now leaves Mary 'homeless' with her half of the loss as baggage
i doubt the property would be the value of the money paid to pay the mortgage off, if you know what i mean.
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