Buying appartment off wife to clear her joint mortgage with past partner

[Flat Feet]

Hello,

This is my first post, so apologies if this is in the wrong section but it seemed to me to be roughly the right place.

My issue:

My wife of less than 1 year has a property with a joint mortgage with her previous boyfriend. His name is on the mortgage, but they had a deal where he took another property with both their names on it and she kept this property. He wants to get off this mortgage to be able to get a new one with his current girlfriend. He is hassling my wife to sell the property to facilitate this. The property hasn't sold over the last few months at the advertised price.

My solution:

I have enough money to pay their mortgage off with savings, excess overpayments on my own property and I would need a small extra loan from my mortgage. So my idea is to buy the flat and clear the mortgage. Then his name is off the register and we can get on with life. Secondly, I would then be paying a lower rate of interest than my wife (using my own mortgage) so we are also better off for that collectively. I would then sell the property as soon as possible. Otherwise the rental income would comfortably cover any interest payments I have. Bottom line is, I take hold of the property by buying at the mortgage amount. Any future profit would go pro rata to my wife.

My questions:

1. If I pay the mortgage amount (about 180k) which is less than the value of the property (about 195k), will it show up on the Land Registry? i.e. would a prospective buyer think that prices in that area have fallen and not be willing to pay the 195k? Should I be looking to get enough cash to pay 195k so that it shows up as a sale at that price? I would have to increase my new loan for that (from about 50k to 65k)
2. Is this a bad idea full stop? Lets assume that legally there is no issue with the ex boyfriend. What have I missed?

In my mind, this is a quick and elegant solution, but I know there are lots of angles that I will no doubt have overlooked.

Appreciate any words of wisdom.

[JustinN]

The way the transaction would be structured is that there would be a transfer of ownership from {Wife and Ex} to {Wife and You} or perhaps to {You alone} in exchange for £x. £x needs to be at least the £180k needed to clear the mortgage.

If the transfer is to {You alone} then you would be "entitled" to pay the extra £15k to Wife alone in respect of her share - Ex would "receive" £90k (all to be used towards discharging the mortgage) and Wife would receive £105k (£90k to be used to pay off the rest of the mortgage and the remaining £15k to be used how she wants. Because you would be paying a total of £195k for the property, that is the value the Land Registry would show.

If you only pay the £180k needed to clear the mortgage, then the transfer should be to {Wife and You} (with your respective unequal shares being specified in a trust deed), and the transfer can still state that the value of the property as a whole is agreed at £195k, which should then be the value the Land Registry will show

As for overlooking things, the points that jump out at me are -

(a) Your wife is liable under a mortgage of a property that she apparently has no interest in (Ex's existing home) and should get released from that mortgage asap

(b) It sounds as though there is no legally enforceable documentation entitling your wife (using your money) to buy out Ex's interest in her present home on a specific basis, so you are relying on Ex's goodwill to achieve this. Luckily, he seems to need your and your wife's cooperation more than you need his at present, but best to get the transfers and releases done asap, in case circumstances change

[Flat Feet]

JustinN, thank you greatly for your comments. I should probably clarify a few points as I can see I wasn't clear.

Although they had 2 homes, the one that he took has already been sold and so that one is no longer in the equation. The ex claims that he can force her to sell the remaining home for 150k if she does not sell it before end of May. He wants to improve his credit record and have his name removed from this property. I do not know whether he is correct about being able to force a sale (it seems a unlikely to me). He does not pay any of the mortgage and only his name is on it.

My Plan A is to buy the property off my wife at the cost of the mortgage. The ex cannot try and claim that he is owed any of profit if I were to pay 195k (even though it is just a short term transfer in my mind). Also then his and her name is off the mortgage.

All I have to do is get the financing sorted out now.

Cheers,
Paul

[JustinN]

Thank you for the clarification

The ex could apply to the court for an order for sale but, as he does not contribute to the mortgage or other expenses of the property and it is not his home, he is unlikely to succeed and will only waste money

That said, it is in your and your wife's interest to get his name off the register, and either way I suggested would do that

Good luck in organising the finances

[Flat Feet]

Thanks again, agree on the plan then.

I suppose the last question is what does the 'order for sale' specify if I can't get the financing? I don't live on the mainland (on one of the islands around it) so despite my large deposit (140k of the 180k), it might throw a spanner in the works.

Does it go to auction with a minimum bid or does it just say we have to put it up for sale (it already is...). I'd like to know my worst case scenario here.

Thanks again, great website by the way (presume you are connected somehow). I'd love to spend more time on it if it wasn't for my employer demanding that I do some work!

[JustinN]

The order for sale, if granted, would require the property to be sold as soon as reasonably practicable and for the best price reasonably obtainable. If it s on the market for sale already at a realistic asking price, that makes an application for an order even more pointless. Bearing in mind that the ex is suffering no direct loss, and could have sorted out the joint ownership when he originally left, as your wife was taking over the mortgage, I cannot see a judge having much sympathy for him

(I'm not connected with the site, BTW, just an enthusiastic contributor!)

[Flat Feet]

Top stuff and a lot less to worry about (one of the main drivers for doing this quickly). Thought it sounded like a hollow threat.

I thought you were the owner - you should ask for equity for your contribution...!

Thanks again

[JustinN]

It strokes my ego ;-)