joint tracker mortgage with sister - her boyfriend wants to buy me out

L

Loudub

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Hi

I currently own two properties with my sister. One is an investment property and other our PPR. Sister in relationship and looks like she will be moving on - questions I have about how we can sort our finances are:

Mortgage no.1 (PPR)- 300k
Value: €250k
Mortgage: tracker
remaining year: 18

Mortgage no.2 - 155k
value: 120k
currently rented, registered with prtb etc, tax returns up to date
remaining years: 12

1) Mortgages are with BOI - would it be possible for a name change on mortgage no.1 i.e. replace my name with sister's partner and they(he) buys me out to compensate for buying into a tracker mortgage instead of a SVR? That way I would get a deposit to move onto a new home. Assuming the bank would give me a deposit. I am in a good job with a reputable company, salary €40k

2) would it be advisable to approach bank about a trade down mortgage, move to a cheaper property bought in both mine and sisters name, I pay the full mortgage and she moves on to a new property with her partner. He does not own any property at present, is in a good financial position with a good job.

3) if bank won't allow change of name on tracker, would it be advisable to approach the bank, switch off tracker in return for a writedown - if, say, 30% writedown the new SVR mortgage would be approx €200k, sisters partner would buy me out for difference of new mortgage (200k) and resale value of the property (250)?

Lots of things going through my head but not sure where to start.
 
Let's get some stuff out of the way first, to focus on what might work

Am I right in saying that the investment property is irrelevant? You are going to hang onto it jointly anyway. The rent probably covers the repayments,so there is no need to sell it.

I presume that the investment property is not suitable for either of you? If it was, then it would be much easier to craft a solution.

Did you do a written agreement when you bought these houses together? What did they say about the process for splitting up?

2) would it be advisable to approach bank about a trade down mortgage, move to a cheaper property bought in both mine and sisters name, I pay the full mortgage and she moves on to a new property with her partner. He does not own any property at present, is in a good financial position with a good job.
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No. The BoI would only allow you keep the tracker for 5 years, so this won't work. You and your sister should try to separate your finances now if at all possible. It would be far better for you to keep the current house and rent out a room - see below.
3) if bank won't allow change of name on tracker, would it be advisable to approach the bank, switch off tracker in return for a writedown - if, say, 30% writedown the new SVR mortgage would be approx €200k, sisters partner would buy me out for difference of new mortgage (200k) and resale value of the property (250)?
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No bank is giving such discounts at the moment and BoI is very unlikely to. If they did introduce a scheme, it would be unlikely that they would offer more than 10%. So the best you could hope for would be a €270k SVR mortgage. Your current mortgage is much cheaper.
 
would it be possible for a name change on mortgage no.1 i.e. replace my name with sister's partner and they(he) buys me out to compensate for buying into a tracker mortgage instead of a SVR? That way I would get a deposit to move onto a new home. Assuming the bank would give me a deposit. I am in a good job with a reputable company, salary €40k
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Let's assume that Bank of Ireland is agreeable, what exactly are you proposing?

Step 1 - you sell your share of the house for €125k
Step 2 he takes over €150k of a mortgage.

If this was a SVR mortgage, you should pay him €25k for buying you out of negative equity.

The repayments on a €150k tracker @1.5% for 18 years are €800 per month

The repayments on a €118k SVR at 4.5%? for 18 years are €800 per month.

So the maximum he should pay you today would be €7,000 ( €125k - €118k)

However, I would far prefer to have a €118k SVR than a €150k tracker.

  • The repayments are the same
  • But I owe less
  • If I sell the house within 18 years, I will lose the benefit of the tracker
  • If I fall out with my girlfriend over the next few years, and we have to sell the house, I might be in €25k negative equity.
So if he buys a €125k with a €150k tracker - it's a fair deal, and neither no cash needs to change hands.
 
Will Bank of Ireland allow him to take over the mortgage? Hard to know. They will probably try to switch it to a SVR. They will probably try to get him to pay down some of the negative equity.

You should ask them and see what they say. Check for a few posts on this on Askaboutmoney where some succeeded.

If they do allow him replace you on the mortgage , will you be able to buy a new house? Very unlikely as you have no deposit and you already have a mortgage for the investment property.
 
It seems to me that your sister should move out if she wishes to do so. If she does, there are two options

1) She renounces her interest in the house and the mortgage
You effectively take them over through a side agreement with her. You take full responsibility for both. You get in a tenant and use the rent to help with the repayments.

This has downsides for her

  • she continues to be liable for the mortgage, so if you get into difficulty she might have to pay.
  • She will find it difficult to borrow while she has another mortgage - but this might not matter if the boyfriend can buy a house on his own.
2) She retains 50% ownership of the house
In rough terms, she takes the rent from the new tenant and pays the repayments on the mortgage. She benefits from any rise in value of the property.
 
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