My wife and I have agreed that she will buy me out, based on the shared equity. However, whilst she can easily afford the mortgage payments, the mortgage company are unlikely to remove me from the joint mortgage.
How can we best go about her giving me the money, me giving up any ownership of the property but remaining on the mortgage as jointly liable. I understand about my mortgage liability but is it possible to remain on the mortgage but give up all rights and ownership of the property?
If she can easily afford the mortgage payments and the mortgage company agree based on her income then you need to come off the mortgage and have it in her sole name otherwize the mortgage company can come after you for the debt even if your name is removed at the land registry.
Is the proposal that your wife pays you a capital sum as well as taking on the mortgage liability?
Yes, unfortunately, it is possible to remain liable on a mortgage on a home one does not own.
When a property is in joint names, and has a mortgage on it, there can be subsequent problems if one of the joint owners is not allowed to occupy the house, or even worse, deprived of his interest altogether – and yet still be legally liable to pay the mortgage.
The problem - from a legal standpoint - is that, when the mortgage was originally taken out, both parties jointly borrowed a certain sum of money and agreed to repay it over a period. This can be enforced by the lender as a matter of simple contract, and the liability will be known in law as joint and several – which in plain English means the lender could sue either spouse, or both. This is not affected by the fact that one of the spouses does not live there.
Furthermore, the Court cannot order a lender to release the non-occupying spouse from his/her obligations under the mortgage. So in theory, if the spouse in occupation defaults, the former spouse could be sued as well.
Unfortunately there is little that can be done about this, given the state of the law. Where this applies, then the question has to be asked as to how the spouse out of occupation can protect himself.
The answer is, unfortunately, not a lot, but the following are possibilities.
· Anyone faced with this possible situation should at least be very sure that the other spouse has the means to make the payments before agreeing to an order transferring the ownership of the home to one spouse outright.
· It is usual for the occupying spouse to covenant to ‘ use best endeavours ‘ to secure a release of the other from the mortgage. In the writer’s view, this should be expressed as a continuing obligation, and not merely as an obligation to write a letter to the lender asking for release, and when that request is refused, then that is it and no more need be done. It could happen, say, that the occupying spouse re-marries and the combined incomes may be enough to induce the lender to substitute the new partner. Or perhaps, over time, the mortgage debt may shrink to the point where the lender will be happy to agree to release the former spouse.
· It is also usual for the spouse in occupation to agree to indemnify the other on the event that the non-occupying spouse gets sued. This may not be much use in practice but it may, just possibly, be useful. It is still a debt and can be enforced like any other debt – if the means are there against which to enforce.
Another problem is that the fact that the occupying spouse remains liable on the former mortgage may prevent him getting another one and he may be forced to rent.
I knew about my liability to the lender. I know that she can afford the payments but they will not remove me.
Our situation is slightly more complicated in that her new boyfriend is giving/lending her the money to buy me out, so she wants to know that once I have been paid my equity that I no longer have any ownership of the house, even though my name remains on the mortgage for a short time.
Her boyfriend is also going through a divorce which is preventing him from getting a mortgage with her for the time being, but this is what will happen in the near future, releasing my obligation to the lender.
I am going to be renting for at least a year so am not bothered about getting another mortgage yet.