Monday 23 January 2017

I can't afford to buy my sister out

sryan@independent.ie

Published 09/09/2011 | 05:00

I bought a one-bed apartment in Dublin with my sister in 2007. I am living in the UK and she lives in the apartment, paying a greater share of the mortgage in lieu of rent. She has just been made redundant and wants us to sell up. I don't, because of market conditions, but I can't afford to buy her out. What options do I have?

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This is definitely tricky. There is little you can do without your sister's agreement, and if she simply can't pay, you can be pursued for the full amount by the bank unless you had a legal opt-out beforehand.

Most mortgages are on a "joint and several liability" basis.

But if you're determined to keep it you do have options, according to Aston's Solicitors' Sonia McEntee.

"Get the mortgage re-designated as an investment loan, and a new rental income to cover half of it if your lender agrees.

"However, you have the added responsibility (and cost) of registering with the Private Rental Tenancies Board and filing tax returns. It also might create problems for your sister claiming social welfare as she still "owns" the asset. She would, therefore, have to agree to this.

"If the property is in negative equity, there is arguably nothing owed to her, but the mortgage has to be paid.

"It isn't realistic to sell a half share in the apartment and your bank might refuse in any event," she adds.

Selling up now may leave both of you owing the bank a balance if it's in negative equity -- perhaps your sister hasn't realised she will have a debt either way.

Sit down with her, with independent arbitration or legal advice so you don't fall out over the eventual decision.

A recent redundancy has left me with €35,000 and I'm not sure when I will find work.

I have a variable mortgage of €140,000 with 15 years on it. Would I be better off paying the money off that or holding onto it?

I'm sorry to hear of your job loss. I'm normally an advocate of paying down mortgage debt where possible, but you have other considerations -- namely whether you will need the redundancy to live on. This should be your first priority.

The argument is really about whether you could earn more by investing the money or save more on lower repayments. Interest rates have risen while deposit rates remain stubbornly low.

My suggestion would be to ultimately pay down the mortgage, but hold off until you have a job.

Split half the money into a high-yielding deposit account -- you can get one-year rates of 3.8pc to 3.95pc from AIB, PTSB and Bank of Ireland at the moment -- and keep the rest liquid to live off.

When you are in a more stable position, use the balance towards your mortgage.

Incidentally, using Bank of Ireland's online over-payment calculator, you would save around €11,500 in lifetime interest payments on your mortgage by paying it down by €35,000.

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