How to change from a joint home ownership and joint Mortgage

[JMDVAN]

How to change from a joint home ownership and joint Mortgage to single owner and single mortgage Simply and cheaply.

Friend of mine bought a house with her then partner 12 years ago. Joint ownership and mortgage.
He left nine years ago and never paid anything towards mortgage or child support in that time.

He now wants clear of the house and mortgage.

How can my friend get the house and mortgage in her name? She has paid the mortgage alone for the last nine years.
But doubt the lenders will take this into account.
Her earnings are not enough to handle the mortgage alone going by the lenders rules on paper.
Obviously sacrifices have been made to be managing it.
She wants it all in her name and continue on as she has for the past number of years. What is the best and cheapest way to go about it?

The mortgage is interest only and no capital has been repaid.
Nothing is in place to repair the capital and no savings have been put towards it.
Once in a single name arrangements will be made to start repaying the capital.

[mcbook]

It's going to be tough if she can't get a mortgage in her own name, probably impossible.

I did this a few years ago and it was pretty easy, but I could get the mortgage. I applied for mortgage in my own name and got a solicitor to draw up the change of ownership documentation. Couple of signatures and maybe £500 to the solicitor.

I think the only way might be to try to borrow the difference of what she can get on the new mortgage vs outstanding balance of current mortgage. Your right that the bank won't care that's she been constantly paying the mortgage for the last x number of years. They'll care whether she meets the current lending criteria.

[TooMany2cvs]

JMDVAN said:

Friend of mine bought a house with her then partner 12 years ago.

2005. Pre-crash. The (mortgage) world was a very different place...

JMDVAN said:

Her earnings are not enough to handle the mortgage alone

Then that's going to be her showstopper. Sorry, but end of. "on paper" is irrelevant.

Apart from that, what size mortgage would she be looking at, relative to the value of the property? 2005, 100%+ mortgages were a thing. Since then, values rose a bit - then fell, and haven't fully recovered in many areas. 90% loan-to-value is as much as she'd probably be able to get, 95% with a squeeky-clean credit record, even ignoring the income issue.

JMDVAN said:

Obviously sacrifices have been made to be managing it.

Interest rates are at an all-time low, and have been for quite a few years. This clearly can't continue, and the only question is when they'll rise, not if. If she's making sacrifices now, then what'll happen when they do?

JMDVAN said:

The mortgage is interest only and no capital has been repaid.
Nothing is in place to repair the capital and no savings have been put towards it.

Interest-only mortgages are pretty much dead now. So her repayments will rise substantially anyway, since they'll be including repayment. This is obviously a good thing long-term, but isn't going to help her one bit if she's already making sacrifices to repay.

To give an indication of the size of rise she'd be looking at <prods internet mortgage calculator> £100k at 3% for 25 years would be £250/mo interest only, £474 repayment...

It may be best for her to just accept that she cannot afford to own that property on her own on her current income.

Edited by TooMany2cvs on Monday 10th July 14:45

[elanfan]

I'm very surprised nay shocked that the mortgage provider would have granted an interest only mortgage with nothing in place to repay the capital sum, normally there'd be an endowment policy or similar in place - very odd if correct. The mortgagee would usually have the endowment assigned to them.

I'd suggest making an appointment with the provider, take any correspondence where the 2nd party agrees to withdraw. Explain she has been paying alone for 9 years and whilst I'm sure they won't be too happy with the situation I cannot see them refusing to put the matter on a correct legal footing. It might be time to consider getting endowment (or similar investment vehicle) quotes and if possible extend the mortgage back to 25 years to give time to build a capital sum to repay the mortgage.

Might be a good time to get a better mortgage rate too!

The legal side should be easily dealt with by any conveyancing solicitors relatively cheaply - the mortgagee will probably gave a panel they use.

Good luck to her.

Edited by elanfan on Monday 10th July 15:03

[rfisher]

In the good old days you could get an interest only mortgage by opening an ISA as repayment vehicle.

May even have been a TESSA (remember those).

She needs to go through the figures with Sarnie.

[Durzel]

Interest only mortgages are still around as far as I know, but the requirements for them are obviously much more onerous and the process more stringent. She would need to demonstrate that she has something credible in place, or multiple things, that stand to pay off the capital. Since she hasn't paid any of the capital thus far I'm guessing there's no chance of this.

TooMany2cvs is right sadly. It won't matter one jot how she has managed to pay the mortgage up until now, particularly as interest-only mortgage premiums are really just the tip of the iceberg anyway. Being brutally honest it sounds like she has been living in a house for 9 years that she can't afford and needs to think about downsizing to something appropriate to her means.

elanfan said:

I'm very surprised nay shocked that the mortgage provider would have granted an interest only mortgage with nothing in place to repay the capital sum, normally there'd be an endowment policy or similar in place - very odd if correct. The mortgagee would usually have the endowment assigned to them.

Back in the day (and this is 10+ years ago) you could get an interest only mortgage pretty much by just having sufficient income and saying the right things.

Edited by Durzel on Monday 10th July 15:44

[esxste]

Questions to answer:

Whats the capital amount owed on the existing mortgage?

What is the value of the house today?

The answers to those questions will determine the Loan to Value of the new mortgage.

If the value of the property has risen significantly in the past 12 years, chances are she will have a good Loan to Value - possibly as low as 60%.

If that is the case, then she'll find that she'll be eligible for the lowest rates on the market. Since she's been paying the mortgage for 9 years and hasn't thought about removing the absent partner, I'm asssuming her mortgage is on the standard variable rate... usually around 4%. The best mortgages around today offer rates as low as 2%. This will make a big difference to affordability.

[cbmotorsport]

Is the estranged partner willing to just walk away? House will be considerably more valuable now than it was 12 years ago. He'd be walking away from a fair bit of equity??

[esxste]

cbmotorsport said:

Is the estranged partner willing to just walk away? House will be considerably more valuable now than it was 12 years ago. He'd be walking away from a fair bit of equity??

Maybe he's the honest sort?

Maybe he's a bit thick?

Maybe there's no equity?

[cbmotorsport]

esxste said:

Maybe he's the honest sort?

Maybe he's a bit thick?

Maybe there's no equity?

Quite, all possibilities, hence my question.

[TooMany2cvs]

cbmotorsport said:

House will be considerably more valuable now than it was 12 years ago. He'd be walking away from a fair bit of equity??

Sure about that?

Bought pre-crash, there's a possibility it may still be in negative equity, depending on where in the country it is and exactly how big a mortgage was taken...
110% LTV was not unknown... 2005 - http://forums.moneysavingexpert.com/showthread.php...

[JMDVAN]

The estranged partner. Has tried to get a mortgage in his own name as he has recently separated. But can't get it as his name is still on the original one and bank said no. Hence why he wants out. Also think he has grow up and realised he has paid nothing child support mortgage in nearly ten years.

[General Fluff]

TooMany2cvs said:

Sure about that?

Bought pre-crash, there's a possibility it may still be in negative equity, depending on where in the country it is and exactly how big a mortgage was taken...
110% LTV was not unknown... 2005 - http://forums.moneysavingexpert.com/showthread.php...

You could get 125% LTV and we nearly proceeded on a deal we had arranged at 113%. We were young and it was the only way to 'buy' a very small home. You can see why people got into messy situations.

OP your friend has my sympathies. Unfortunately it's not a situation that can be resolved easily if the finances don't stack up. It sounds like they need professional advice.

[Vaud]

JMDVAN said:

How can my friend get the house and mortgage in her name? She has paid the mortgage alone for the last nine years.
But doubt the lenders will take this into account.
Her earnings are not enough to handle the mortgage alone going by the lenders rules on paper.

Would parents or a relative act as guarantor?

She also needs to ask herself - without a plan for the capital to be repaid - should she continue in this situation or downsize?

[Durzel]

JMDVAN said:

The estranged partner. Has tried to get a mortgage in his own name as he has recently separated. But can't get it as his name is still on the original one and bank said no. Hence why he wants out. Also think he has grow up and realised he has paid nothing child support mortgage in nearly ten years.

Perhaps she should resolve that issue instead. Why hasn't she chased him for child support / mortgage payments? If the house is in negative equity then a proportion of that negative equity is his too.

If she doesn't have the means to practically pay off the capital by the end of the mortgage term then quite simply she can't afford the house she is in. That's a cold, hard truth but it's better to realise that sooner rather than later.

[cbmotorsport]

Durzel said:

If she doesn't have the means to practically pay off the capital by the end of the mortgage term then quite simply she can't afford the house she is in. That's a cold, hard truth but it's better to realise that sooner rather than later.

Rubbish. If you take the view that house prices are likely to rise in the long term you can have an interest only mortgage, sell up and downsize with the equity when the mortgage needs paying off.

Obviously if prices don't rise, or worse they fall, you're stuffed. History does suggest though, that over the length of an average mortgage (25/30 years) prices do go up.

I know some very shrewd people who live in very nice houses, who have climbed the property ladder using interest only mortgages, and then sold up and bought outright with the equity they accrued.

[Vaud]

cbmotorsport said:

Rubbish. If you take the view that house prices are likely to rise in the long term you can have an interest only mortgage, sell up and downsize with the equity when the mortgage needs paying off.

Obviously if prices don't rise, or worse they fall, you're stuffed. History does suggest though, that over the length of an average mortgage (25/30 years) prices do go up.

I know some very shrewd people who live in very nice houses, who have climbed the property ladder using interest only mortgages, and then sold up and bought outright with the equity they accrued.

True, but isn't it probable that the mortgage company will ask for evidence of how the capital will be repaid?

[fewfe3]

Unfortunately it is not going to be that simple, if she can't afford to get a mortgage on her own.
It won't matter that she has been able to pay the current mortgage for the last 9 years because a new mortgage is likely to be a lot more, as you will have to pay interest + capital.

I don't think it is unheard of for people buying around that time on interest only mortgages to not have something set up to pay off the final amount. I'm not sure what people rely on to pay of the mortgage at the end, but if they were made to put x amount away to pay for it at the end of the term they might as well had a capital repayment mortage

[Durzel]

cbmotorsport said:

Rubbish. If you take the view that house prices are likely to rise in the long term you can have an interest only mortgage, sell up and downsize with the equity when the mortgage needs paying off.

Obviously if prices don't rise, or worse they fall, you're stuffed. History does suggest though, that over the length of an average mortgage (25/30 years) prices do go up.

I know some very shrewd people who live in very nice houses, who have climbed the property ladder using interest only mortgages, and then sold up and bought outright with the equity they accrued.

I'm not saying it isn't possible if you're savvy, and it's objectively easier to make money if you have money, but she won't get an interest-only mortgage nowadays unless she can prove she has something or a combination of things in place - e.g. endowment policies, investment bonds, large salary, etc - to convince the bank that she has the means to pay off the capital. She won't be able to do that if she is already making sacrifices to afford the current monthly premium which is not clearing any of the capital.

The bank's "bet" is whether you can pay off the loan, not some nebulous future position based on market movement.. they have other wings of their business for that.

[was8v]

Sounds like the house needs to be sold, and your friend use any uplift in value as a deposit to buy a home she can afford to repay a mortgage on.

Unless she has a (very good) friend or parent who can go in with her to get a mortgage on the place and she arrange to pay them back.

Edited by was8v on Wednesday 12th July 10:56