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Shared ownership - seeling part of my property

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  • Shared ownership - seeling part of my property


    I bought a house with my mother and wife in 2007 for £270K. My mother put £100K towards it and my wife and I 20K and we paid the monthly mortgage. We are about to get divorced and my wife has agreed an amount for me to buy her share.

    Since my mother is elderly and it would be too much for her to move again. I have agreed to try to keep on the property. I will therefore buy my wife's share as part of a Consent Order divorce settlement.

    I applied for a transfer of equity to keep the house and mortgage on, as there is still a £140K mortgage on it. The bank has informed me that they can only lend me £105K and therefore my brothers have offered to pay the £35K deficit and therefore will have a share of the property.

    The idea is for me to continue to pay the £500approx per month mortgage (although I will only be spending 2-3 days/nights a week here).

    My question is: my mortgage charges a 3% penalty on any payments over a certain amount, therefore if my brothers pay off 35K of the mortgage there will be a charge of £1,050. Who should pay for this? Should I pay for it as it is my mortgage or should they pay for it? I could argue that I paid for the stamp duty and will continue to pay for the mortgage (although I would rather sell up, but for my mum's sake, I am trying to keep the property on).

    Please let me know what people's views are on this.

    many thanks

    Mike L

  • #2
    Re: Shared ownership - seeling part of my property

    Hmmm, this is a tricky one....

    Under normal circumstances (whatever they are!) a person, or group of people, who derives benefit from a cost should be the one(s) to bear that cost. However in the case you are describing nobody directly benefits from the £1,050 charge levied by the mortgage lender (other than the lender themselves and I don't suppose they'll pay it for you), but many people have indirect benefit.

    Your brothers benefit as they get to buy in to a property that may increase in value, you benefit from retaining ownership rather than being forced to sell and also from lower mortage payments as the debt will be reduced, your mum benefits as she gets to keep her home, and your wife benefits from getting paid out without having to wait for the property to sell, which in a slow market could take months.

    So who pays?

    As far as I can see it's purely a matter of personal judgement, there is no set answer for your circumstances.

    If it was me I would feel a little embarrased about asking my brothers to pay the fee as they are being kind enough to provide financial assistance to solve the problems that you would all otherwise have (albeit they are getting a share of the property for their trouble).

    Personally I would say that the cost should be shared between the current owners of the property. In most divorce cases that I have been aware of when a property is sold then the selling fees (estate agents, solicitors etc) are shared between the separating owners of the property as part of the financial settlement.

    So, if your brothers were not offering to help you then you and your wife would have a much larger bill to pay for the sale of the property than the £1,050 early repayment charge that would be incurred if they halped you out. I would therefore suggest that you and your wife should happily split the fee, but as I have stated above, there is no right or wrong answer to this.

    Also, check with the lender if your understanding of the penalty charge is correct. In many situations the lenders will provide a concession on applying the fee up to a set limit (for many mortgage contract you can pay off up to 10% of the outstanding balance of the debt in any 12 months without the fee being payable) so you may not pay the 3% charge on the whole amount of £35,000.
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