WA Break-up; when property is worth far less than the mortgage

[hollyy_19]

Hi,
My partner and I are likely to split up in the next few months. We have a house that is worth about $280,000, but the mortgage is $370,000 (we bought 3 years ago, too early when house prices in the Pilbara started to drop). I would say I have contributed more towards mortgage and expenses over the last 3 years, but would call it even to keep it amicable.
What would usually happen if 1 person wants to keep the house with regards to the $90,000 in "empty debt?" Would the person giving up ownership have to "buy" some of that debt? Ie. if my partner were to keep the house, he would have to refinance with his own mortgage, but would I legally have to take some of the excess debt with me, or vice versa?
The house will be difficult to sell due to the layout, it's a bit different for the area, and is also unlikely to increase in value enough to cover the mortgage at any time in the next 10 years, so the person left with the house is highly unlikely to gain a profit from it anytime in the next decade or 2.
I realise it would be easiest to sell and split the debt, but I think one of us will want to keep the house.
We both earn around the same, aged 29 and 35, no kids, none to be had, both capable of maintaining the mortgage on our own.
Interested to hear someone else's thoughts on the morally right and fair thing to do, and what can happen when house is worth less than mortgage.... ?

 

[Aneta Dimoska Di Marco]

Hi Holly, Good question.

Typically, losses of a relationship are shared -- just like equity. But in this case, you have to consider that if your partner stays in the house, he will likely derive a number of benefits. For one, the value of the home may change in the future and the full value of the debt may not be realised. Secondly, he may be able to negotiate with the bank and limit mortgage payments due to financial hardship until the property is sold when the market is better. Thirdly, he gets the intangible benefit of remaining in an already established home, while you have to go out and pay rent, as well as purchase new furniture -- therefore, you both end up with incurred expenses/losses. All this would be highly disadvantageous to you if you paid $45,000 to your partner to let him remain in the house. The better approach is to say that the house has zero value, not a negative value that gets shared. If the house is the only asset the fairest approach would be that you walk away debt free.