Negative equity & want to add BF to title

[NoBother]

Hi

Wondering if anyone has any bright ideas as I've wracked my brains about this and can't seem to find a solution (guessing there probably isn't, but worth a try).

I bought an apartment in 2007 and am now in negative equity to the tune of at least €100k. My boyfriend is from the UK (where he currently lives and owns a house). He is moving over here and wants to be able to contribute to the mortgage, but understandably wants to be protected for this contribution should things ever sour (hopefully not). This is aside from the problem that he would be contributing to a mortgage that is more than the value of the apartment.

Ideally I would get his name added to the title deeds, but as far as I understand the bank would need to agree and in a non-negative equity world we could remortgage. A quick glance would indicate that if a bank were to lend it would require a max 80% LTV (so brings the equity gap to be filled to c€160k - which neither of us have lying around)! It's likely that if he was added to the deeds he would technically need to buy a share so as to avoid gift tax and would incur stamp duty (although it may be worth waiting until we see if it is replace with a recurring property tax).

Would being married make any difference (don't think it would as still uncertain how assets would be allocated in a separation/divorce situation)?

Any thoughts or ideas on this much appreciated! Tks

 

[jambo.ie]

Would rent a room make sense? You would both earn tax relief on the rent?

 

[Brendan Burgess]

Hi Nobother

First of all, well done on taking a practical approach to it. Most people enter into such transactions without making any contingency plans. Then if they do split up, the whole thing becomes a financial nightmare which makes the whole thing much worse.

He wants to be able to contribute to the mortgage, but understandably wants to be protected for this contribution should things ever sour

Option 1
If he is your tenant paying rent only, then he needs no protection. As Jambo points out, if he pays you rent up to the Rent a Room maximum, you won't pay tax on it, and he will get some small tax relief.

I would probably suggest this as the initial step. It requires no solicitor or major financial transaction. You probably should do a simple agreement "This represents rent only. It does not convey any ownership on the property or any liability for the mortgage". He should pay this into your bank account and not into the mortage account.

Option 2 Boyfriend buys half your apartment at current market value.

Property value today| €300k
Mortgage| €400k
BF's share of house|50%
BF's share of mortgage|37.5%

At its simplest, if your BF has €150k available, he could buy half your apartment from you and you would set that off against the mortgage reducing it to €250k.

He would end up with half an apartment worth €150k

You would end up with half an apartment worth €150k with a mortgage of €250k.

If he does not have €150k available, he could be added to the mortgage and title deeds, and you would do a legal agreement to reflect the above.

This is technically possible but I would advise your boyfriend not to do it. If things don't work out, then he would find it very difficult to unwind. It is not a good idea to go into partnership with someone with a €100k deficit.

There would be legal and stamp duty costs, but what would it achieve? Nothing as far as I can see.

Option 1A
If you are struggling with your mortgage, your boyfriend can pay you rent and can lend you money. You pay him that back when you can. If you split up , he might have difficulty getting it back.

Conclusion
The simplest is for you to just charge him rent for the moment. If you split up there are no financial hassles.

The most likely medium term outcome is that you sell both your houses and buy a larger house together. If you can't sell your apartment because of negative equity, your boyfriend may buy the house in his own name. We will deal with those complications when it arises.

 

[NoBother]

Thank you Brendan. Figured we were limited in options, but good to get it put so clearly. The negative equity really makes what would otherwise be big life decisions for people extra difficult. Thankfully I am able to pay my mortgage and I like where I live - so we'll have to work things out as they are and wait the decade or so until the negative equity situation neutralises or he sells his house (which I won't be asking him to do). Thanks again.