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Guaranteed Rent | My partner and I split up a year ago. We jointly own a house worth about £400,000 with an interest-only mortgage of £242,000. My ex paid half the mortgage until the rate doubled after our cheap rate finished, so since August I have paid it on my own. Guaranteed Rent
We have a 4½-year-old daughter who lives with me. Over the 4¼ years we have owned the house I supported my partner by paying for food, the car, holidays and our daughter. We paid the mortgage and other bills equally. On top of that I have put about £25,000 more into our joint account since we opened it (we have done a lot of work on the house, which I paid for, and he did a lot of the work himself). Guaranteed Rent
I also own a flat worth £520,000 with a mortgage of £180,000 that is nothing at all to do with my ex and that I rent out. Because my earnings are slightly less than £15,000 I can only pay off my partner and get him off the mortgage by selling my flat and putting most of the money into the house I live in. Ideally, I would like to be able to buy a cheaper buy-to-let property, maybe using £70,000 from the sale of my flat. We have both agreed my daughter and I can’t live in my flat, which is in London, as my daughter is in school in Winchester and we both have family nearby.
We are trying to agree a figure to buy him out. I’ve offered two alternatives: either I give him the figure we agree by remortgaging my flat, but he remains on the house mortgage even though he won’t own the house and won’t be able to get another mortgage; or I buy him out completely by selling my flat, but I’d like to take something off what I owe him to compensate for the costs I will incur through doing this, eg capital gains tax.
If we sell our house (I’d lose money doing this), I can’t afford to buy another unless I sell my flat too. He doesn’t seem willing to compromise over any of it.
I think that in law it’s irrelevant how much extra I paid into the house because we own it 50/50. But I wonder if I have anything at all I can negotiate with, otherwise I feel I’m losing money all over the place so he can get what he wants at no cost to him. I’m really confused and feeling backed into a corner. DC
A The first thing I would say is that although you do need to agree a figure with your ex, you don’t need to discuss how you are going to raise the money to pay him. Second, you are right that irrespective of how much more you have paid towards living in the house, you are still considered to own the property 50/50. So your ex is entitled to half the equity in the property you jointly own.
Currently, your lender “owns” £242,000 of your house in the form of the mortgage, and you and your ex own equity of £158,000. So to buy your ex out you would need to take on his half of the mortgage, which you’ve effectively already done, and pay him £79,000 (ie half the £158,000) in cash, less any legal fees and so on.
As you have correctly identified, one option for raising this is to sell the flat you let out and buy a smaller property to let. A cheaper alternative, assuming the rent would cover an increased mortgage of £259,000 on the flat you let, would be to increase your buy-to-let mortgage by £79,000 and raise the cash to pay your ex that way.
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