Negative Equity & Break Up

[Danger Mouse]

Hi,

hopefully I'm not repeating a thread but I couldn't find one with exactly the same circumstance. Here is what I would like advice on:

-Myself and my ex bought a property together.
-There is now €60k negative equity.
-One of us has put €40k into the house and the other has put in €20k
-The person that put in €20k is staying in the house and has taken over full mortgage payments but would not be able to get full €340k mortgage to legally take it over.
-What happens from here? should the person that moved out (€40k investment) be compensated, is that money gone and in fact more owed due to neg equity, or is there a middle ground?

(It may be silly but I don't want to say which party I am so as everything remains impartial)

Any advice would be greatly appreciated

 

[moneyhoney]

Did you draw up any sort of a legal agreement when you bought the house together? If not, you're going to have to reach agreement.

If neither person can take out a mortgage in their own name, you may have to consider:

1. Both of you moving out & renting it - would the rent cover the mortgage or would you both be prepared to supplement the rent to keep paying the mortgage until such time as you are not in neg equity and can sell without having to make up the shortfall?
2. Sell up if you can come up with the shortfall and agree who pays what proportion of that based on what you originally put up for the deposit.

Hi,

-What happens from here? should the person that moved out (€40k investment) be compensated, is that money gone and in fact more owed due to neg equity, or is there a middle ground?

The money is gone. The house is in neg equity so neither of you are owed anything. How you make up the shortfall might be one way of balancing things up, so to speak.

Also have a look at this post - http://www.askaboutmoney.com/showthread.php?t=127184

 

[vandriver]

Assuming that you both contributed equally to the mortgage,I would think that the person leaving should contribute €20k.That way you both would have losses of €60k .Please check with a solicitor if this is an advisable thing to do.

 

[moneyhoney]

Assuming that you both contributed equally to the mortgage,I would think that the person leaving should contribute €20k.That way you both would have losses of €60k .Please check with a solicitor if this is an advisable thing to do.

This would make sense if you sold the house for €60k less than the mortgage. The person who left could contribute €20k to shortfall, while person in house would contribute €40k. Bu that assumes you both have access to this kind of €€.

 

[Danger Mouse]

Many thanks for all the replies. As you know it's a very tricky situation so you're thoughts are appreciated.

 

[SarahMc]

Can the person who moved out raise a mortgage? That seems the cleanest way rather than going forward jointly owning a property after ye have split.

If neither party can raise a mortgage, and the house will not be sold, then there can be no clean break as no losses have been realised, and both continue to be responsible for shortfall/raise in equity.

 

[moneyhoney]

Can the person who moved out raise a mortgage? That seems the cleanest way rather than going forward jointly owning a property after ye have split.

QUOTE]

Just FYI -

This is pretty much impossible as the bank will only lend 90/92% of the value of house & current mortgage is much more than that - whoever took out a new mortgage would have to make up the shortfall.