If you currently own your home by yourself, you may be wondering if you can remortgage to add someone else’s name to the mortgage. This could be a partner or a friend.
The quick answer is yes you can.
In this guide we explain how you can add a second borrower to your mortgage. We will look at how the process works, the timeframe involved, and whether you need to remortgage to do it.
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How do you remortgage and add someone new to the mortgage?
Before we jump straight in with how this can be done via a remortgage, it’s important to understand that there are two different ways to add someone to a mortgage.
The process of adding someone, or removing someone, from a mortgage is called a ‘transfer of equity‘.
It’s a legal process that involves a lender and a solicitor (and you).
HERE ARE THE TWO OPTIONS:
Add someone to your existing mortgage
The simplest option is often to approach the lender you are already with.
Most are amenable to this as moving from one borrower to two borrowers reduces their risk.
However, they will still need to check out the new person. This will involve a full credit check and affordability assessment.
Before they give any decision.
Add someone to a new mortgage
The second option is to remortgage over to a brand new lender.
Here, you will make a full joint mortgage application for the size of mortgage you need. This is called a transfer of equity mortgage. You get the opportunity of choosing a new interest rate deal and perhaps borrowing a little extra money.
The new lender will assess both of you equally and will also need to value your property, before giving a decision.
Which is the best way?
Neither option is necessarily better than the other, it just depends what works for you at the time.
Does your existing mortgage have early repayment charges?
If so, then these are likely to be quite expensive. Early repayment charges (ERC) are payable if you take your mortgage to a new lender whilst still in an interest rate deal. A broker can help to run some numbers for you, but it’s probably better to stick where you are for now.
Do you have a very low interest rate at the moment?
If you are part way through a 3-5 year fixed rate then chances are that your rate is much lower than those available to new borrowers. If you remortgage away then you will have a double whammy; first you will have to pay the exit fees, second you will be paying a higher interest rate. Definitely better to stick for now.
You need to borrow more money but your lender won’t let you
If your financial circumstances have changed since you first took out your mortgage, it’s possible that your lender may refuse to give you any more money. Or perhaps you have picked up some bad credit and your lender doesn’t allow this. Moving to a more amenable lender could allow you to add a partner to your mortgage and borrow some extra.
Your current lender has declined the new borrower
This doesn’t happen that often but if the person you want to add does not fit the lenders profile then they will be declined. This is predominantly down to their credit history. If you still want to add them to your mortgage then you will need to find a specialist lender and submit a joint remortgage application.
Regardless of how well you have made your monthly mortgage payments in the past, your lender is under no obligation to add your partner if they fail the assessments.
How long does a transfer of equity take?
This process of buying someone out is known as transfer of equity. So named because the person who leaves the home ‘transfers’ or sells their ownership (equity) to someone else. This guide looks at how long a transfer of equity would take and provides an overview of the whole process.
How does a joint mortgage work?
Let’s talk about how a joint mortgage works in practise. This will be the same if you go with your current lender or remortgage to a new one.
APPLYING FOR A MORTGAGE
Lenders consider the combined income of all applicants, which can increase your borrowing power.
MORTGAGE LIABILITY
With a joint mortgage both parties will have responsibility for making sure the scheduled repayments are made on time and in full. Each has 100% responsibility for the mortgage, not 50% each.
PROPERTY OWNERSHIP
The property can be owned as ‘Joint Tenants‘ or ‘Tenants in Common‘. The former means equal ownership, while the latter allows for different ownership percentages.
FINANCIAL ASSOCIATION
When you take out a joint mortgage with someone else, you are ‘linked’ to them by way of the mortgage agreement, and vice versa. This will show up on your credit report. Your financial associates also appear on your report, and companies may check their credit history when deciding whether to approve you. This is because your financial associates may influence your ability to repay debt.
CONTACT A REMORTGAGE EXPERT
If you wish to investigate your re-mortgage options we can put you in touch with a fully qualified whole of market mortgage broker.
Do you need a solicitor?
Transferring part ownership of a property from one person to another will need the assistance of a conveyancer or solicitor.
In respect of a transfer of equity remortgage, they have two jobs to do:
AMEND THE MORTGAGE – This is changing the mortgage deed from one person to joint and then updating the Land Registry records.
AMEND THE PROPERTY OWNERSHIP – Again this will involve updating Land Registry with the new owners, and the type of ownership.
You will find more useful information in our article: “Do I need a solicitor to buy out my partner?“
How a mortgage broker can help
Many people will approach a mortgage broker at the point they need to apply for a new mortgage. This could be to remortgage, move house or to capital raise.
But brokers aren’t restricted to just arranging a mortgage for you.
They can advise on different options and help you plan ahead to get the best outcome.
So in the case of adding someone to your mortgage, they can explain the pros and cons of approaching your current lender, and comment on how likely your partner is to be approved.
They will run through the early repayment charges and help you to compare the different options.
And if you decide to go ahead with remortgaging your property, they can search over 100 lenders to find you a great deal.
Respect Mortgages can match you with an award winning independent mortgage broker, who can help you wherever you are in the UK.
Just call us on 0330 030 5050 and we’ll do the rest.
Yes, this is possible. Doing both changes at the same time will also save money on legal fees.
Yes. They will own a proportion of the property as well. So they need to agree to their equity being transferred to someone else.
No, there’s no requirement for them to have a job or an income. But the lender will still need to receive a full mortgage application and for them to pass the credit checks.
Don’t forget that a joint remortgage with a new lender includes a full assessment of your income, debts and affordability.
A standard remortgage normally takes 4-8 weeks to go through. Where this also includes a transfer of title allow for a few weeks longer.
Remortgaging is certainly a convenient time to borrow some extra money. Whether you can, or not, will depend on your income and affordability.
No, not at all. It’s perfectly fine to bring a friend or family member in to the mortgage arrangements.
As we have mentioned above, a solicitor is needed to make the legal changes at Land Registry, both for the mortgage and the property ownership.
However, there is no requirement, from a mortgage point of view, to have independent legal advice.
So to keep the costs down, many borrowers will ask the lenders solicitor to do their legal work as well. Sometimes this will be at no charge but transfers of equity do normally attract a discounted fee for the extra work.
There’s no legal reason for a payment to be made. This goes for both the person that is leaving and the person that is joining.
It will be up to you to decide. But you may want to discuss this with a solicitor before you make a hasty decision.
Not necessarily. It is possible to transfer equity with your current lender, which would not be classed as a remortgage.
Yes. The lender will need to reassess the borrowing situation and check that it is still affordable for the person staying.
Also in this section
Remortgages
Capital Raising Mortgages
Day One Remortgages Explained
Debt Consolidation Remortgage
Guide to Remortgaging
Product Transfers
Transfer of equity mortgage
This post first appeared on Respect Mortgages - Be In The Know, please read the originial post: here
