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Equity in property when 3rd party involved

  • mj0310
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3 years 2 months ago #495747 by mj0310
Hi all,

Apologies if I haven't directed this to the correct area.

I'm in the process of remortgaging following splitting up with my partner and was after some assistance with a few things.

We bought a new home 7 years ago with the Bloor Homes Help to Buy scheme, so 15% share belongs to them (or a separate holding company). Our mortgage stands at around 60%, with the remaining 25% being our own equity.

My partner and I have agreed to split our equity 50/50 (as we both had equal deposit to start with) and for myself to take on the mortgage and add on the shared equity into a new mortgage (which I am in the process of agreeing). I have some inheritance so have agreed to buy out my partner’s 12.5% equity.

My partner cannot afford to stay in the house, hence the reason for myself to take on the mortgage. She will look to rent close by with our two children aged 7 and 3.

My queries come down to whether the third party equity should be taken into account when calculating our own equity. With our house valued at around £210,000, these are the figures:

Mortgage – 60% (£120,000)
Our equity – 25% (£58,500) – which will be split 50/50
Third party equity – 15% (£31,500)

My query is whether paying back the third party equity should come from our own equity and then split the difference, or whether I would just need to take this extra on as I will be taking on the whole mortgage? This will obviously affect how much my partner would be entitled to.

If we take the third party equity from our own equity, we'd be left with £13,500 each. But if I took on the third party equity as part of the new mortgage, our own equity would be £29,250 each and I would pay the whole lot off via the new mortgage myself, and my partner would take her share of the equity.

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  • Pepsi64
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3 years 2 months ago #495854 by Pepsi64
Replied by Pepsi64 on topic Re:Equity in property when 3rd party involved
Is your partner, your partner or your wife?

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  • mj0310
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3 years 2 months ago #495856 by mj0310
Sorry for not confirming, we aren't married

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3 years 2 months ago #495857 by Pepsi64
Replied by Pepsi64 on topic Re:Equity in property when 3rd party involved
OK. I don't know the answers to your questions.

For the sake of your children, could you not let your partner and your children stay at the house until the children have grown up? Isn't there another agreement you could come to? You could go to the CAB for advice.

Even if she can't afford the mortgage on her own, she would possibly get help with Housing Benefit which she could use towards the mortgage.

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3 years 2 months ago #495860 by mj0310
My partner doesn't want to stay in the house and couldn't get help with Housing Benefit whilst she is named in the mortgage. We considered me taking on the full mortgage and renting to her, or changing our mortgage to a buy to let mortgage but my she wants to have a clean start.

Having said that, we want to keep the house so that the kids have some level of stability in what will be a tough time, hence the reason for me taking it on. They will be staying with me 2-3 nights a week

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3 years 1 month ago #495869 by Pepsi64
Replied by Pepsi64 on topic Re:Equity in property when 3rd party involved
It's good that the home will be kept and at least it will feel more of a stable split for the children.

Your best bet is to speak to the lenders and the company that have the 15%. The company will have the biggest say in what you can and
can't do.

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  • Clawed
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3 years 1 month ago #495871 by Clawed
Your calculations interest me, I'm no expert but if I was taking on a new mortgage on the whole house I would expect to clear everything and start from scratch.

House worth 210,000
Charges on house
Mortgage (120,000)
3rd Party (31,500)

Equity to split 58,500
Amount each 29,250

Or house worth 210,000
Mortgage (120,000)

Amount to split 90,000

Amount each 45,000
1/2 3rd Party portion (15,750)
Amount left 29,250

Sorry if I'm being dense but it seems the same to me. The 3rd party bit isn't equity they own part of the house which has to be cleared like the mortgage before any equity can be calculated.

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