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charliegolf
6th Nov 2018, 14:31
My daughter is at home with us separated- looks like divorce. They have 2 properties, the 'home' and an investment flat in liverpool. Both are joint mortgages. The home is up for sale, and will go at some point. Probably!

The Liverpool pad, one bed, 8th floor of a noughties tower block in Cheapside, was bought on an interest only mortgage and is in negative equity (£100K vs £138k mortgage). The neg equiity means they cannot transfer it to a repayment mortgage without a £38k cash injection. So they are told.

The question. Can he, 'give' the flat to her, so that she can work to get it on a repayment (he has no disposable income, she does) and start paying down the debt? She thinks he would agree, since both would like rid of it, IF it can be done. She can certainly afford to service the debt.

As it stands, both will be hit (again) with the 2nd home stamp duty thing. Another reason we think he's agree.

Thanks

CG

Fitter2
6th Nov 2018, 15:05
Free legal advice on PPRune is worth every penny. (Less the cost of acting on bad advice).

racedo
6th Nov 2018, 15:51
If she is taking on some liabilities for him then it would be reaonable to expect a quid pro quo on something else................

Met a friend of a friend recently who has been basically screwed in her divorce, he a wife beater, violent thug with arrests, she ended up conceding mega house, he has the kids as she travels a lot and then he married his divorce lawyer who now frames the threats. She still paying mortgage on house in his name (he has very well paid job), pays mega maintenance and gets way way less than 50-50 access and on his terms. I told her she needs a B*****d lawyer as he sees her as a cash point with threats and harassment all the time including now demanding more maintenace as he had more kids and cash for Christmas presents rather than her buying them for her kids.
She reluctant to counter as she thinks would harm the kids.
Any names for lawyers who have zero scruples and like a nasty dirty fight please PM them.
She refuses to accept she is a battered wife (ex wife) but she most definitely is and it didn't stop on divorce day.

charliegolf
6th Nov 2018, 16:01
I was more after the legality of him 'handing over', or 'signing over', a currently shared debt. As in, "Give it all to me, and I'll take responsibility for it all".

CH

(F2: Noted :ok:)

Thomas coupling
6th Nov 2018, 17:08
C'mon CG Pprune for serious life changing advice????? WTF.

charliegolf
6th Nov 2018, 17:32
Thanks for contributing. Oh that everyone was so helpful.

CG

RatherBeFlying
6th Nov 2018, 17:54
Good legal advice at the onset of a family breakup may help minimize the damage.

The negative equity is a complicating factor and it might not turn out well if the local market continues downward. Brexit is greasing the downward slope.

​​​​​​In my case, our house had doubled in the short time we had it and my ex wanted her half of the equity. However a downturn was in the wings and the prices dropped some 25% in the next couple years. One of my best decisions was declining to tie an extra mortgage around my neck when the signs were out that the prices were at the edge of a cliff.

My free advice is to sell both properties and work through the lawyers on achieving an equitable split of the resulting assets.

ramble on
6th Nov 2018, 18:01
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KelvinD
6th Nov 2018, 18:26
CG: Speaking from experience, she will probably end up with a 50/50 deal. I had to pay her 50% of the purchase price of the house (her lawyer wasn't too sharp, the house is now worth three times that).
The mortgage had not yet been paid off (interest only) so I was faced with a choice of selling up and finding somewhere else to live or allowing myself to be suckered into a life time mortgage (equity release). Given that I had our son living with me, I had to think about his continuing education, his circle of friends etc so I bit the bullet and went for the equity release option. The company pension plan had gone down the Suwanee. We had previously agreed that I would opt out of that and put the money into building a house in the Philippines. Needless to say, she now has that.
Not a happy situation and I wish your daughter well.

Chronus
6th Nov 2018, 19:04
My daughter is at home with us separated- looks like divorce. They have 2 properties, the 'home' and an investment flat in liverpool. Both are joint mortgages. The home is up for sale, and will go at some point. Probably!

The Liverpool pad, one bed, 8th floor of a noughties tower block in Cheapside, was bought on an interest only mortgage and is in negative equity (£100K vs £138k mortgage). The neg equiity means they cannot transfer it to a repayment mortgage without a £38k cash injection. So they are told.

The question. Can he, 'give' the flat to her, so that she can work to get it on a repayment (he has no disposable income, she does) and start paying down the debt? She thinks he would agree, since both would like rid of it, IF it can be done. She can certainly afford to service the debt.

As it stands, both will be hit (again) with the 2nd home stamp duty thing. Another reason we think he's agree.

Thanks

CG

Before the question may be answered the following needs to be clarified:
"they have two properties", "both are on joint mortgages". Confirmation that they own the properties jointly.
Is there any equity in the principal residence.
"Give" the flat ? Presumably by this it is meant he is to transfer his interest to her. But his interest is a negative figure of £19000, that would mean she is giving him £19,000. What then is she receiving in agreeing to taking on such a liability.
The starting point in the division of matrimonial assets is for each party to take out that which they have contributed, what is in their ownership and then considering how to divide the remainder.
In so far as not being able to transfer the mortage to a repayment type is concerned, the reason is clearly that no sane and sensible lender will lend £138,000 on a property that`s worth £100,000.
All that seems clear is that it will be hard to find a lender who is willing to fund the finacial damage of a divorce. An application to Mum and Dad Bank seems to be the only course of action.

Pontius Navigator
6th Nov 2018, 19:17
Looking at it logically assuming a 50-50 split:

Assume main house is £220k and flat is £100k the total assets are £320k. However there is a mortgage debt on the flat of £138k. Net assets are therefore £182k.

A 50-50 split means £91k to each party.

If she got the flat she would gain £100k equity and £38k debt. In this case she should pay him £9k and service the debt herself. That £9k is dependent on the value of the main house and the split being 50-50.

I hope this shows it is neither simple nor sensible to do a simple transfer. I think the JB expert advice I'd correct, get a bigger b******d lawyer.

ethicalconundrum
6th Nov 2018, 20:05
Simple answer: Put the keys to the flat in an envelope with a letter stating: Joint owners; John Smith and Jane Smith hereby give all interest in the property described as (legal description here) to debtor. We default our ownership, and claim no property ownership of said property on and after this date: 6 Nov 2018. Have a nice day. Signed _________.

Presumptions: Property was bought during the marriage, and neither party brought it in as an asset from outside marriage. Both parties contributed(not necc equal) to the payments, upkeep, taxes, use, operation, util, etc. IOW, both parties are bound by the utility and cost of the neg equity property roughly equally. Contra-Example: John and Jane a married couple own a garage at a race track where John keeps and maintains his track car for his exclusive use. Jane has no use or utility for said garage. John and Jane pay equally for the lease/mortgage, taxes, utilities, etc. Jane WILL have potential rights to increase in value, and NO exposure to the decrease value of the property once liquidated.

Likely outcome: Both parties will be jointing responsible for the liquidation costs of the demised property. Should one or the other assume or agree to accept indebtedness, the other party would be expected to make up the difference in liability. In the example above, in the case that the garage had lost 38k in value, and John agreed to accept the property, it is quite possible that Jane would owe John nothing. But - in the case where both parties shared equally in the utility, and finance, then Jane would be expected to give up half the decline in value in some other way. Could be cash money, or other property value differential.

YMMV, objects in mirror, contents have settled, pro driver on closed course, and may cause anal leakage.

Pontius Navigator
6th Nov 2018, 20:41
Sending the keys to the lender does not seem very sensible as it will have an adverse effect on both parties credit worthiness.

racedo
6th Nov 2018, 21:40
Sending the keys to the lender does not seem very sensible as it will have an adverse effect on both parties credit worthiness.

Only for a period of 6 years from date of last missed payment BUT a lender is not going to take a hit on a property if they can go after either or both parties and they will so if he has no money then she will end up paying.

The £100k valuation is junk in a forced sale by Mortgagees in posession.................... potentially need to knock £20k off this as they will add on costs and it is a forced sale.
The Quid pro quo as mentioned earlier is what does she get for taking on extra debt............... don't do it unless compensated.
If as posted the equity split means he gets a minumum payment then take it.

Despite no bank willing to offer a Capital and Interest Mortage there is Zero to prevent a standing order being set up to pay capital.
Rough guess is that its a 4-5% mortgage with rent £7-800 so probably just covers the mortages and fees with zero voids.
Any profit made on property then pay it to lender to reduce balance.

Reckon if she pays any profit plus sets up £250 a month standing order then ultimately it will help her position in the flat and assumming
inflation and 20 years she shoould have a decent sized savings pot by it.

Espada III
6th Nov 2018, 22:24
As a Chartered Surveyor I do professional valuations for divorce cases. I meet lots of tough lawyers, mainly in the North West. If you want some recommendations just ask. Your daughter needs proper advice especially in relation to the negative equity situation.

funfly
6th Nov 2018, 23:03
Basically in a divorce you can do whatever you like with the assets --- as long as both sides agree.
In a disputed divorce what you end up with depends on the strengths of your legal adviser.
Legal advisers get paid by the amount of work/time they spend on the case, it is therefore in their interest to complicate matters and to propagate mutual dislike.
No matter how much each side of a divorce hate each other, it is their financial interest to agree these financial matters without litigation, even get a mutual trusted friend to arbitrate. Come to a resolution and put this to the divorce court for finalisation.
In all disputed cases it is the legal profession that will make most gains.
Some might even consider that walking away from a bad marriage with nothing results in a far better quality of life than extended litigation which is guaranteed to leave both parties scarred and bitter.

ethicalconundrum
7th Nov 2018, 01:35
Sending the keys to the lender does not seem very sensible as it will have an adverse effect on both parties credit worthiness.

Well, having a divorce is likely to have a pretty nasty affect on one of the debtors anyway. At some point, one needs to decide how much the credit-worthiness is worth. At 38,000 Sterling, I might decide I can deal with the effect.

But again, just one man's op-ed. Each person has to decide on their own.

Gipsy Queen
7th Nov 2018, 01:50
The negative equity is a complicating factor and it might not turn out well if the local market continues downward. Brexit is greasing the downward slope.

RBF - I suggest that it would be more accurate to say that it is the present government's wholly inept handling of the subject which is greasing the "downward slope". Brexit, per se, whilst having a slight affect upon a few segments of the economy, is not having an influence sufficient to create problems of this magnitude.

Sorry charlie golf for the drift.

charliegolf
7th Nov 2018, 11:19
I've revisited my post, which I thought was crystal clear- maybe not...

At the mo, there is no dispute, and no attack lawyers are needed. They bought a 'home', whilst still lumbered with the flat in negative equity. The flat pays its way, just- no profit. The Both parties have wanted rid for some time- it has already cost an extra £17k in stamp duty on the main home 'because they own another property'.

What she wants, is to take control by having sole ownership of the debt, bunging in money to convert it to repayment, and let it pay its way for 20 years. She can afford it. We all think he'll be happy to be out from under, just so he doesn't take another stamp duty hit when he buys again after the main home sells.

So my question was- can he just hand it over without legal fuss and mortgage company fuss?

That clearer?

Thanks for the replies.

CG

LowNSlow
7th Nov 2018, 12:19
Firstly, if he transfers the flat from joint names to her name only there will be a further stamp duty impact but only around £150 (3% of £100,000/2, 3% as it's a 2nd property).

Secondly, as the terms of the ownership have changed she will have to remortgage the flat and if she's going down the buy-to-let route she will struggle to get more than a 75% mortgage. This means she will have to stump up £38k to cover the debt plus £25k as the deposit for the new mortgage.

Does she want to commit £63k to this flat? Wouldn't it be easier and cleaner just to sell the place, take the £19k hit each and then commit her cash to a more profitable property?

charliegolf
7th Nov 2018, 12:36
LNS, thank you for that- didn't see that one coming. Cheers.

CG

racedo
7th Nov 2018, 16:49
Most decent Divorce lawyers will provide a 1st consultation free or for a nominal amount.

Best friend and her hubby had substantial house, pensions and stuff with 3 kids. They saw a lawyer in London who openly told them that £10,000 plus was likely bill if used them but then gave them a whole lot of detail on resolving it independently. Lawyer said less involvement you have with a lawyer the more likelihood you may actually communicate with each other in 5 years and she was happy not to see them again as if it wasn't adverserial why involve lawyers.

They took the advice and resolved it between them only using lawyers to ensure everything legally was in order.

They still talk and kids didn't suffer............................ well not at the extreme end anyway.

In relation to the flat I beleive it is possible to sign an undertaking with solicitor waiving any further benefit in relation to this and getting both solictors to agree. Mortgage can stay in both names to prevent a huge financial hit on remortgage. Also important to notify HMRC that he has no longer any beneficial interest in Flat.
Setting up a Standing Order to pay of an amount per month off mortgage will over time get it below Loan to value ratio to remortgage.

Jetstream67
7th Nov 2018, 17:22
As common sense and divorce law are very different things they need to get proper paid for legal advice for their situation.

If that isnít clear read it again

Thomas coupling
7th Nov 2018, 17:53
So let me get this straight CG:
You are going to hoist in everything that is said on this thread and then act on it, in the interest of your daughter?
If she happens to ask daddy where he got this information, daddy is going to say what?
Stop being a cheap skate FFS, it's your daughter. Get financial and legal advice from recognised experts - and yes, you'll have to pay for it dellboy!

racedo
7th Nov 2018, 18:44
So let me get this straight CG:
You are going to hoist in everything that is said on this thread and then act on it, in the interest of your daughter?
If she happens to ask daddy where he got this information, daddy is going to say what?
Stop being a cheap skate FFS, it's your daughter. Get financial and legal advice from recognised experts - and yes, you'll have to pay for it dellboy!

Stop being a PITA, CG is asking more to ensure when he has a discussion he is aware of ups and downs in relation to anything that is happening.
Could of course ask Solicitor every question.................... key thing being is many will only tell if you ask the right question and then add it to the cost.
If you friend asked you for advice because they believed you may have some experience would you automaticall say No or give them some advice so
when they talk to an expert they at least had some knowledge or background.

PDR1
7th Nov 2018, 20:04
Firstly, if he transfers the flat from joint names to her name only there will be a further stamp duty impact but only around £150 (3% of £100,000/2, 3% as it's a 2nd property).

3% of £100,000/2 is £1,500, not £150.

PDR

LowNSlow
7th Nov 2018, 20:26
Well spotted PDR, you are indeed correct! My fat thumbs got it wrong again!!