Pay off a mortgage, or use savings for new mortgage?

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Aodhán

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My partner and I have about €150,000 in savings. We would like to buy our first home shortly. However, she and her friend have a mortgage which is jointly and severally liable. The negative equity is approximately €130,000 between them/€65,000 each. They are currently trying to sell the property in question in order for them to go their separate ways (we had been told the jointly and severally liable aspect of that mortgage would impede our ability to raise a mortgage and get on with our life as a family). I have never owned a home.

In the event of a sale, the €130,000 will be transferred into a personal loan at the same variable interest rate as the mortgage. We are not sure what we ought to do with our savings, and my partner is a bit anxious that the current bank might make her liable for the lot if she pays off her share of the €130k immediately. What is the smartest way to proceed here? Thank you.
 
Presumably you're not tied to the same bank that the negative equity mortgage is with?

What are the circumstances of your wife's fellow investor?

I think that I'd be making my wife's financial circumstances appear as bad as possible with a view to getting a deal on the €130k shortfall.
 
If when they sell is the new personal loan going to be a joint loan too or will it be divided into separate loans in each name?
 
First and foremost, whatever you do, you and your partner must put down in writing whatever you agree. Some relationships end. And when they do there can be huge fighting over who owns what and who owes what. "my partner and I have a €150k in savings". How much is yours? How much is hers?

Secondly. Are you sure that it makes sense to sell the property? If it is a tracker mortgage, then it's likely to be a very profitable investment and they should hold onto it. Or maybe try to do a deal with the lender. You won't get a write-down, but you may well get the residual €65k into your partner's sole name.

Thirdly - can you not buy a house in your own name? Would €150k of savings and your salary not allow you borrow enough?

Finally, in case you missed the first point, do a written agreement on whatever deal you do, just in case.
 
Just for clarification; we're married and the residue on the existing mortgage will not be converted to a personal loan but rather will remain as a mortgage in joint names. It will not be divided into separate loans. The bank categorically will not do any deal regarding a write-off (both investors are capable of servicing this mortgage but it is impeding their ability to move on with their new families and buy their own homes). It's not a tracker mortgage.
 
Aodhán said:
the residue on the existing mortgage will not be converted to a personal loan but rather will remain as a mortgage in joint names.
Click to expand...

Hi Aodhán

It's only a technical point, but it will no longer be a mortgage if there is no property. It will be a personal loan, but that makes no real difference.

Brendan
 
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