Equity in property when 3rd party involved

mj0310 wrote:

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.

If you have agreed to split it 50/50 then what you split is what you own now ie 25% of the total value so you need to give your ex £29350.

Break down your original calculation to make it clearer

Mortgage 60% £120k
third party 15% £31.5k
Your equity 12.5% £29.25k
STBX equity 12.5% £29.25k

What your buying is your ex's share

Please contact the retailer ie Bloor homes. Some of these percentage buys or 20 50 75% had catches.
One of the biggest catches was that should you buy the house for £100k with them retaining 25% ie £25k. If the house was subsequently sold for £90k then the part owner still got £25k and the buyer took the hit.
On the other side of the coin I don't think that builders are kind to buyers and having invested £25k they aim to make a profit by speculation. So if as you say the house is valued at £210k with a 25% share they may want 25% of that figure. After all the rent is termed s landlord status and can increase.This may be akin to say buying a car on the knock and the car depreciates but the value of the initial loan does not suddenly decrease because the car value decreased.
Schemes are so varied so talk to whoever runs the scheme. In some cases its a housing association who has taken on the 25%.
I don't believe you can get housing benefit when buying a percentage. I am under the impression that you are classed as a house owner and not a renter. (I asked someone the other day about this and that was their answer)