We have talked to Ulster Bank
Option 1
- he can take over the mortgage in his name only, if he gives the bank €50K;
Option 2
- him and girlfriend can take over the joint mortgage and keep the same terms & conditions, but she is unwilling to do so, as the potential negative equity is too high, and it wasn't her debt in the first place (understandable!)
I presume that these are two separate options. Fair play to UB for allowing the girlfriend to take over your name on the mortgage.
From the girlfriend's point of view
She can buy half a €200k house for €100k.
The repayments on a mortgage of €100k for 28 years at 4.5% SVR would be €523.
Her share of this cheap tracker: €541, so there is very little difference in actual outgoings.
She is guaranteed the cheap tracker rate as long as she stays in the house. The SVR could well go up even if ECB rates fall.
A mortgage of €100k @4.5% is better than a mortgage of €150k at cheap tracker, but it's by no means €50k better.
Here are the outlines of a few solutions...
Solution 1
She agrees to take over your share of the mortgage for €150k.
You, your brother and she do a side agreement.
She has the right at any stage to sell the house
You will pay her the negative equity
If house prices don't rise, her monthly payments will be gradually reducing the negative equity anyway. She is paying around €2,000 capital each year. After 10 years, the mortgage would be reduced by around €25,000. If the value of the house rises, you and she could well be out of negative equity and she might still have her cheap tracker.
This would work well if she can trust you to pay off the shortfall, if it comes to that. Could your mother act as guarantor?
Solution 2
Why do you want to buy another house at all?
Just rent another house for the time-being.
The girfriend's rent will cover the interest on the mortgage comfortably. You will have to pay some of the capital, but that is fine, as it's reducing your negative equity.
When the negative equity is reduced, the girlfriend may well be happy to then buy out your share.
Solution 3
A mortgage of €100k @4.5% is better than a mortgage of €150k at cheap tracker, but it's by no means €50k better.
Would you consider paying €20k off the mortgage? She would then be borrowing €130k on a cheap tracker to buy €100k worth of house.
If they are planning to live in the house for a few years, €130k on a cheap tracker is probably equivalent to €100k @4.5%.
Solution 4
Could your mother remortgage her home and borrow €50k to lend to your brother? If the interest rate is 3% higher than the tracker, this will cost around €1,500 per year.