Assuming a Mortgage

valoren

My wife purchased a property with her sister in 2008 (before we met).
The mortgage was 225k and there is currently outstanding balance of 186k.

We both find ourselves at an impasse.

I am a first time buyer and I currently co-habit with my wife in the property.
Her sister, who is 10 years older than us both and single with no dependents, has moved to her parents house since we got married a year ago.

They both still pay the mortgage. I also contribute to my wife's share of this repayment.

I have offered to buy them both out of the house at the current market value. My wife is in favour of this arrangement. Her sister was positive towards this arrangement. They would both cover the negative equity and would both be mortgage free.

The house was initially valued at between 150 and 160k, considering the work they had done on the house.

I arranged a valuation of my own and this was conservatively valued at between 130 and 140k. So quite a discrepancy. Other houses for sale in the intervening months have been given a similar asking price.

My wife's sister subsequently dug her heels in and is adamant that she will only sell for 160k. (thus leaving neg equity of 13k between them both and not 24k each).

I am now considering the option of taking over her as the joint mortgage holder. Is this even possible? Is it crazy to assume a mortgage that is in negative equity?

Any advice appreciated.

Butters1979

This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.

SarahMollie

valoren wrote: »

My wife purchased a property with her sister in 2008 (before we met).
The mortgage was 225k and there is currently outstanding balance of 186k.

We both find ourselves at an impasse.

I am a first time buyer and I currently co-habit with my wife in the property.
Her sister, who is 10 years older than us both and single with no dependents, has moved to her parents house since we got married a year ago.

They both still pay the mortgage. I also contribute to my wife's share of this repayment.

I have offered to buy them both out of the house at the current market value. My wife is in favour of this arrangement. Her sister was positive towards this arrangement. They would both cover the negative equity and would both be mortgage free.

The house was initially valued at between 150 and 160k, considering the work they had done on the house.

I arranged a valuation of my own and this was conservatively valued at between 130 and 140k. So quite a discrepancy. Other houses for sale in the intervening months have been given a similar asking price.

My wife's sister subsequently dug her heels in and is adamant that she will only sell for 160k. (thus leaving neg equity of 13k between them both and not 24k each).

I am now considering the option of taking over her as the joint mortgage holder. Is this even possible? Is it crazy to assume a mortgage that is in negative equity?

Any advice appreciated.

They both pay the mortgage yet your wifes sister gets no use from the property. Firstly I think she is being hard done by on this alone, unless there is more that you havent told us.

Anyone selling a house is entitled to dig in and get the price they want at the risk of not selling.

Are you mortgage approved to buy the sister out or is this all just talk at this point?

seamus

There's a very good chance that the bank simply won't allow you to swap your name out for hers. Instead they'll want you and your wife to take out a new mortgage in both your names and your sister-in-law and wife to stump up 13k each to clear the negative equity. In effect you and your wife would "buy" the house from your wife and sister-in-law.

In any case, the bank will perform a complete re-evaluation of your financial situation, including a valuation of the property. If the valuer does not agree that the property is worth €160k then nobody is going anywhere.

If you are happy to go with your original plan of buying them both out @ €160k, then you can give that a go. Worst case scenario is that the bank valuer refuses to value it at this level and you have to go back to the drawing board.

Butters1979

SarahMollie makes a good point also, although it sounds like the house would not sell at the sisters expectations.

Could you just take over her side of the mortgage? Buy her out for what she's paid and then you and your wife take full ownership?

valoren

SarahMollie wrote: »

They both pay the mortgage yet your wifes sister gets no use from the property. Firstly I think she is being hard done by on this alone, unless there is more that you havent told us.

Anyone selling a house is entitled to dig in and get the price they want at the risk of not selling.

Are you mortgage approved to buy the sister out or is this all just talk at this point?

I am mortgage approved but her sister has essentially moved out of her own accord.
She has not spent any time in the property for months, hence the proposal from me to buy the property from them both.

valoren

Butters1979 wrote: »

SarahMollie makes a good point also, although it sounds like the house would not sell at the sisters expectations.

Could you just take over her side of the mortgage? Buy her out for what she's paid and then you and your wife take full ownership?

That's my current thinking. Taking over her share, on the existing mortgage.

Seamus makes a good point above - would I actually get a mortgage as a FTB on a property that is overvalued as per the current market itself. It would be a risk for the bank. I had not thought of that.

SarahMollie

valoren wrote: »

I am mortgage approved but her sister has essentially moved out of her own accord.

She has not spent any time in the property for months, hence the proposal from me to buy the property from them both.

Have you thought about your wife and sister continuing to hold the mortgage evenly, but you and your wife pay the market rent on the property?

Right now it seems like the sister is paying 50% of the mortgage, with you and your wife paying 50% between you, and getting 100% of the beneficial use of the property.

I know its artificially juggling money between some of the same ppl, but this way the sister is getting her share and everything is fair.

Buy out seems unlikely unless the official valuation matches the sisters expectations, so this may not be an option.

SarahMollie

valoren wrote: »

That's my current thinking. Taking over her share, on the existing mortgage.

Seamus makes a good point above - would I actually get a mortgage as a FTB on a property that is overvalued as per the current market itself. It would be a risk for the bank. I had not thought of that.

Do you have any cash savings so that the amount you borrow is more equal to the value of the share of the property you'd be buying? Or are you looking to borrow the full amount?

The latter is highly unlikely in my opinion.

valoren

Butters1979 wrote: »

This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.

She has said she will not take on the mortgage on her own, buying out my wife's share. It's not an option. That's completely understandable.

She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).

SarahMollie

valoren wrote: »

She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).

I get that its unfair to expect her to take over the whole mortgage but equally, i don't think she should be able to block it being rented out if that the most financially prudent option.

However if you do rent it out, have you even considered the tax implications? BTL for PAYE workers is not great.

Also, how do you feel about the house? Is it the type of place youd like to live or are you only there out of circumstance?

valoren

SarahMollie wrote: »

Have you thought about your wife and sister continuing to hold the mortgage evenly, but you and your wife pay the market rent on the property?

Right now it seems like the sister is paying 50% of the mortgage, with you and your wife paying 50% between you, and getting 100% of the beneficial use of the property.

I know its artificially juggling money between some of the same ppl, but this way the sister is getting her share and everything is fair.

Buy out seems unlikely unless the official valuation matches the sisters expectations, so this may not be an option.

SarahMollie wrote: »

Do you have any cash savings so that the amount you borrow is more equal to the value of the share of the property you'd be buying? Or are you looking to borrow the full amount?

The latter is highly unlikely in my opinion.

Prudently, I would pay the current market price of 130k.

With regards to the 50/50 split, my wife is currently unemployed and I am contributing to her portion.

Tiddlypeeps

Thread very carefully here. If anyone walks away from whatever arrangement you come to feeling hard done by then it could easily cause people to fall out with each other. Nothing makes people fall out quicker than money. Whatever arrangement you end up coming up with make sure before you follow through that all parties involved don't feel like they are getting the short end of the stick.

It's such a messy situation that the cleanest thing to do is probably to buy elsewhere and you and your wife move there. Then rent the old house so your wife and her sister can use the rent to clear the mortgage and when out of negative equity sell up. You might be attached to the house you are in, but is it really worth the potential fallout if things don't work out.

Or you could offer to pay the sisters side of the mortgage every month as a form of rent for using her half of the house until the negative equity is cleared, then you might have a better chance of buying out her share without much chance of fallout.

If the sister is left with a large chunk of negative equity to clear on a house she hasn't even been living in for the last year but has been paying the mortgage on anyway then it is probably going to at best leave a sour taste in her mouth.

valoren

SarahMollie wrote: »

I get that its unfair to expect her to take over the whole mortgage but equally, i don't think she should be able to block it being rented out if that the most financially prudent option.

However if you do rent it out, have you even considered the tax implications? BTL for PAYE workers is not great.

Also, how do you feel about the house? Is it the type of place youd like to live or are you only there out of circumstance?

The house is adequate for our current needs but I wouldn't see ourselves living there with a large family. I would envisage moving after 10 years or so to a larger home.

Tiddlypeeps

valoren wrote: »

She is also reluctant to rent out the property (as in, they both keep the house as an investment property and my wife and I purchase a house of our own).

Sorry only saw this after I posted the above. Has she said why she doesn't want to rent out the property?

valoren

Tiddlypeeps wrote: »

Sorry only saw this after I posted the above. Has she said why she doesn't want to rent out the property?

She doesn't want to be a landlord.

Graham

That's a really stick position to be in OP, I don't envy you.

Personally I'd be looking to either leave the house as jointly owned by the sisters (and rent it out) or I'd put it on the market.

Anything else just leaves you wide open to all sorts of accusations in years to come whenever the property does increase in value.

Added:

Sounds like the prudent option would be to sell up.

Tiddlypeeps

valoren wrote: »

She doesn't want to be a landlord.

Using a letting agent would take 99% of the work out of it, and you could assure her that you and your wife will handle any of the other 1% of issues that pop up.

dori_dormer

Also ou should be aware that since you are married and your wife owns a property you are not considered a first time buyer. That may change your calculations a bit!

The fairest way to split the mortgage currently is you and your wife pay the current rent and the sister tops up to cover the mortgage. Or even fairer really is you two pay the current rent + 50 % of what's left over. As technically that's all the sister would be paying into it if it was rented to someone else. The sister might be nicer and do the first option since your wife is unemployed.

If you say you are thinking of moving out then the sister only has the option of renting or selling. Personally I wouldn't get money involved with family and I think you two should look at buying elsewhere. The sister will always feel hard done by and like you got a good deal if you buy her out ( whatever the complexities of that may be)

valoren

dori_dormer wrote: »

Also ou should be aware that since you are married and your wife owns a property you are not considered a first time buyer. That may change your calculations a bit!

The fairest way to split the mortgage currently is you and your wife pay the current rent and the sister tops up to cover the mortgage. Or even fairer really is you two pay the current rent + 50 % of what's left over. As technically that's all the sister would be paying into it if it was rented to someone else. The sister might be nicer and do the first option since your wife is unemployed.

If you say you are thinking of moving out then the sister only has the option of renting or selling. Personally I wouldn't get money involved with family and I think you two should look at buying elsewhere. The sister will always feel hard done by and like you got a good deal if you buy her out ( whatever the complexities of that may be)

My wife bought the house before we met. I have never owned a property.
Am I not considered a first time buyer?

seamus

valoren wrote: »

My wife bought the house before we met. I have never owned a property.
Am I not considered a first time buyer?

Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.

valoren

seamus wrote: »

Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.

Yes, I would be making any mortgage applications in my own name.

seamus

In that case, it's still worth noting that the deposit rules are minimums rather than obligations. That is, while you might qualify for a 10% deposit under the mortgage rules, the bank can still choose to require a 20% deposit from you for affordability purposes.

Cuddlesworth

Tiddlypeeps wrote: »

Using a letting agent would take 99% of the work out of it, and you could assure her that you and your wife will handle any of the other 1% of issues that pop up.

Until you get problem tenants. And with a property worth 130, I doubt rents would cover mortgage and costs, let alone damages if needed.

Explosive_Cornflake

seamus wrote: »

Only if you purchase alone. If you're buying jointly with your wife, the 20% deposit rule applies.

Aside from the 10% deposit rule, first time buyer means nothing any more anyway. There are no grants, reliefs or exemptions for FTBs.

Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
Would I be a first time buyer or not if I went to purchase a house?

dori_dormer

I'm sorry but I believe what seamus says is incorrect. If you are married to someone who owns or previously owned a property, you also lose your first time buyer status. Whether they are involved money wise with the purchase of the property or not . Just like when your wife sells her place. You will be involved by having to declare that you allow the family home to be sold.

PhoenixParker

Explosive_Cornflake wrote: »

Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
Would I be a first time buyer or not if I went to purchase a house?

If you haven't drawn down a mortgage in the past then some banks treat you as a first time buyer even if you've owned property.

Since you've inherited yours, it may even be all banks.

Married couples get the worst case scenario of either party, so if one has purchased a property with a mortgage before then neither of you are first time buyers.

seamus

Explosive_Cornflake wrote: »

Seamus, off topic, but quick. I own a property, but I inheritied it, only paid a small amount of tax with cash.
Would I be a first time buyer or not if I went to purchase a house?

For the banks' purposes you're a first-time buyer because you've never had a mortgage on a property.

Under Revenue definitions, you are not a first time buyer. But that's not longer relevant anyway.

Jen44

Butters1979 wrote: »

This sounds messy. Your wife's sister is expecting you to pay over the market value of a house because you are married to her sister. I would not touch it. The house was bought near the height of the housing boom and she doesn't like been in negative equity. It's not your job to bail her out, even if you are also baling out your wife

Is there an option for her to buy your wife out, and you can go buy somewhere else with first time buyers and at market prices.

you will not be considered FTB as your wife has already bought a house. I had this with my husband I had already bought a house and when we bought together he was not considered a FTB as I already had purchased a house!

ct5amr2ig1nfhp

As other posters have said, you are in a very messy situation. I would stay well clear of this situation based on previous experience, especially when family is involved.

If the sister has moved to the parents house and is happy to continue paying the mortgage, why would you want to assume the mortgage anyway? I think it's a win for you and your wife.

Unless the sister is unhappy of course or feels she has been forced out of her home.

Jen44

Jen44 wrote: »

you will not be considered FTB as your wife has already bought a house. I had this with my husband I had already bought a house and when we bought together he was not considered a FTB as I already had purchased a house!

I think the op is suggesting not buying with his wife but buying completely alone with no input or mention of his wife.

Senna

Lying on a mortgage application, especially about marriage wouldn't be a good idea for obvious reasons.

seamus

Senna wrote: »

Lying on a mortgage application, especially about marriage wouldn't be a good idea for obvious reasons.

A single application for a mortgage generally doesn't require that one lists their spouse on it. It only becomes relevant for the family home declaration, but there's no reason why he would need to lie to the bank.

ct5amr2ig1nfhp

While the spouse does not have to be named, any mortgage application form I have seen requests your martial status and number of dependants.

So the bank will know the OP is married, unless he was going to lie on the application (which is obviously not advised).
They will inevitably ask if his partner is in employment.

seamus wrote: »

A single application for a mortgage generally doesn't require that one lists their spouse on it. It only becomes relevant for the family home declaration, but there's no reason why he would need to lie to the bank.

valoren

It's a mess is right

I would be looking at applying for a single application. Not a joint application.
Single as in, I would be the only name on the application and not single as in Marital status.

If my being married and my now spouse having a previous property is a non runner for the banks then we'll just have to accept that reality.

I think the best option would be for my wife and her sister to now consider their house as an investment property, and to consider renting it out as suggested earlier (to either view this as a sell when the negative equity is cleared then sell up or her sister moves back in when out of the negative equity and takes over the mortgage herself).

I will then apply for another house as our primary residence. I am now reluctant to get involved in their property, by either purchasing at the market rate (and they sell at a loss) or taking over her sister's share of the mortgage.

Butters1979

So she doesn't want to buy your wife out of the property or rent it out, instead she wants you to pay over the market price for a house your wife already half owns?

I would not touch it.

hardCopy

I think if you paid her significantly over the market rate she could find herself liable for gift tax on the difference. It certainly works the other way, i.e. buying under market value from a relative.

http://www.independent.ie/life/home-garden/homes/what-tax-do-i-pay-if-i-sell-to-my-daughter-26824889.html

Sleepy

How long have you been living in the house without the sister being there? And were you paying her rent during this time?

As you've been enjoying the benefit of her mortgage payment, you and your wife really should have been paying rent to your sister in law for however long that period is. If it's been a number of years, you may find that had you been paying her half the market rate rent, the difference between the valuation you'd place on the house and the one she'd place on it might be far less than you'd otherwise thought.

Butters1979

Sleepy wrote: »

How long have you been living in the house without the sister being there? And were you paying her rent during this time?

As you've been enjoying the benefit of her mortgage payment, you and your wife really should have been paying rent to your sister in law for however long that period is. If it's been a number of years, you may find that had you been paying her half the market rate rent, the difference between the valuation you'd place on the house and the one she'd place on it might be far less than you'd otherwise thought.

This is a very good point. I would assume this situation has just happened as I doubt someone would be paying half a mortgage but not living in the house for very long.

OP can you clear that up? When this started and even why?

Also it's not about his valuation against the sisters. It's about a valuers (and therefore when it comes to getting a mortgage the banks) valuation which seems to be lower than her valuation. This makes it sound like she's trying to take advantage of the fact he's married to her sister, as a stranger would not (usually) pay that much over the value of the house.

Deer

Go to the bank and lay the circumstances out before them. You never know they may consider your case. Without going into circumstances on here but they are similar, in fact the wife was in pretty bad shape credit wise the bank granted a single mortgage to the husband in the case of someone in my family. So go in and have the chat. The worst that can happen is that they say no.

valoren

The current situation has been in place since September last.
My wife's sister currently stays full time in their parents house in the city centre.
This is convenient for her work wise as the house in question is a 45 minute commute to the city.

I spoke to a bank about a mortgage as a single applicant on a house in the locality.
They have said that any application would need to be a joint application as I'm married
and they refused a mortgage as they would need to see circa 900 per month saved for 9 months.

I had thought that I could apply for a mortgage (asking price of 175k) as a sole applicant and pay this myself.
I would comfortably satisfy the required financing/savings history/no personal loans etc I didn't see the legal side of such an arrangement. Will need to save further now for the 20% deposit and not the 10% as a FTB.

fyfe79

OP, seems you (well, mainly your wife because she's the co-mortgage holder) should be paying your sister-in-law half the going rate for rent since Sept, considering the sister-in-law is not benefiting from living in the house but still paying half the mortgage.

At the end of the day, houses are only worth what someone will pay for them. Your sister-in-law isn't that interested in selling but you are interested in buying, so can you blame her really for holding out for a deal that will suit her? In her mind why should she sell while in negative equity just to make someone else happy, even if it is her sister & husband? She could ride it out and wait for the value to rise.

You've a vested interest in the house right now which other prospective buyers don't have, so you will need to pay more than the market rate in order to get it.