Split with ex, he's buying me out and current mortgage out of deal - few questions

dats

Hi there,
If anyone has any advice or opinions on my situation, I'd be grateful.
Ex and I split a few months ago and are joint owners of our house which has been on the market, but isn't selling. New plan is:

• he buys me out, extending the mortgage by about £15k
  
• has interest-only mortgage
• gets consent to let
  
• lets the house
  

Our current mortgage is on Skipton's SVR. We were about to switch when we split up. He's not good at this kind of thing and I'm keen to move on, so I have volunteered to work out his options...

Loan outstanding: about £146k (26 years to run) House value: tricky one, but on market for £260k His salary: £47k + £2k bonuses New loan required: about £160k

Questions:
1) I was going to call Skipton as a first step, to see what they can do for us/him. They may not have the most competitive product, but I am wondering if there will be less/lower fees than switching to another lender entirely. Is this a sensible starting point?

2) Before I jump in and call them, will they care (not as in tea and sympathy ) that we split up? Clearly they would soon find out, based on what I want to ask them, but for the purposes of our current mortgage, will it matter? We have a Declaration of trust in place stating that we're jointly liable for all costs associated with the house until it's sold (when that was the plan).

3) If the ex ends up staying with Skipton, will they just take me off the mortgage (for a fee, obviously) and allow him to then move to a new product, for example a 3yr fix - or is it essentially redeeming the loan and him starting from scratch with a whole new product? I understand that the Skipton will need to satisfy themselves that he can afford it, etc.

4) Is it best to mention the consent to let at this point? I'm concerned, not having a full understanding of BTL mortgages, that they may say he needs one - but from what I can gather, if this is his only mortgage, it should be ok to keep it as residential, is that vaguely right?

5) The plan is to switch to interest-only and let the house until the market rises again, potentially three years depending on conditions. Will the Skipton view switching to interest only as an acceptable/normal thing to do - or are they likely to start asking questions about why, how he proposes to replay the capital at the end of the deal etc? Basically - should I be completely upfront with them about what he's planning to do?

6) Comments on whether the numbers would add up, eg LTV, his salary etc?

I think that'll do for now! If anyone would like to comment, it would be very helpful.
Many thanks for reading,
Claire

grogdog

on that salary he would have no problem getting that mortgage himself at a better rate than svr, if you TELL the lender you are going to rent out the property they will not give you a residential mortgage and a buy to let mortgage will be more expensive, if he does rent it out make sure you have a landlords buildings insurance policy no a normal one.

dats

Thanks, grogdog.

I was under the impression that if it was someone's sole mortgage, then lenders would generally allow a residential one - as it's fairly common to want to let out your main home for a short period of time? But maybe this applies more to existing mortgages than taking out a new one.

So is it best to sort out the remortgage and then hope the consent to let thing happens smoothly, afterwards?

What I am concerned about is going through the remortgage process and keeping quiet about the letting - and then the lender subsequently refusing consent to let. I would kind of prefer to be able to call up the Skipton and be completely honest about everything from the start, but clearly don't want to do that if it's going to ring alarm bells and have them say no!

Grateful for any more input,
Cheers,

Claire

asandwhen

I would check skiptons terms and conditions of any new deal that you might get because Im with chelsea bs and they have a condition that states if I choose to rent out the property my rate will switch to the svr. If this is the same with skipton then it probably isnt worth paying high fees to get a good deal only for them to pull it when you start renting it out.

I did do this with the Abbey a few years ago and they were happy to keep me on my deal but I had to pay them a fee - think it was about £200.

mic200202

He would be looking for a further advance to allow him to buy you out. These can sometimes cost more with some lenders.Ideally, you would like to have a new rate incorporating the further advance all on the one deal,with no extra fees. On the switch to interest only - dont take it for granted they will allow this. You could ask what their policy is on this.Some lenders will want to know how the loan would be repaid and ask for evidence of this - ie ISA,Endowment etc,or they may accept future sale of property as am alternative. If you know this first, then you can decide whether or not to remortgage elsewhere.You will need to use a solicitor anyway for the equity purchase (which you will have to pay for separately). The permission to let is the last thing to tackle,and I would leave this until the transfer has been agreed on the terms you want.As stated above,some lenders have no prob doing this (for a small fee!!!). Watch out for landlords insurance - its not expensive and many people forget about it.

dats

Thanks, guys.

Skipton's website says they charge £100 admin fee, plus an extra 0.25-0.5% rate loading, dependent on LTV. So I'm assuming this is their general policy, but am wary of banking on it.

It also mentions evidence of how to repay the loan when transferring to interest-only - ex won't be banking on having to set up a repayment vehicle, but will just have to sort something out, if they won't accept future sale of property.

When you say 'equity purchase' do you mean 'buying' the additional borrowing? I still don't know, given that we want me taken off the mortgage, plus additional funds, plus the fact that its currently on their SVR, whether it will be a case of redeeming this loan and starting again, if we/he stays with Skipton...guess I will have to ask them that question.

Thanks for the landlords insurance tip

getmore4less

Whats the place going to rent for and does it stack up.

On £260k value would need to be well over £1300pm to get close to being worth keeping the place.

Unless he wants to become a landlord or live in the place longer term the rental option may be the wrong way to go.

Could be better off selling and buying somewhere he does what to live when prices drop.

dats

Been on the market since June and nothing doing. Five viewings and no offers. Selling was our first choice, until we realised that it was probably a cr*p financial decision and if there was any way to avoid that, we should.

Rental would realise about £900-950 a month. Currently paying about £950 a month on a repayment basis - but switching to interest only would lower that, for a while until things pick up in the housing market - and we're/he's aware that that could be a way off. His salary would cover mortgage payments even if it was on a repayment basis - plus include some to put aside for repairs. He's not looking to make a profit from renting - just using it as a way to protect his investment until things improve.

If renting doesn't pan out, he is prepared to live in it, although doesn't really want to. Meanwhile, I want my cut which will free me up to move on with my life! We considered carrying on owning jointly, but as he can afford to maintain the mortgage/hopefully the rental side of things, it makes more sense for me to benefit in the short term (by taking a smaller percentage, but having it now) while he will benefit long term - by knowing that the eventual profit/decision to sell when he chooses, will be his.

Is it really such a bad idea?

silvercar

Never realised cut and pasts could magnify small print:)

1) I was going to call Skipton as a first step, to see what they can do for us/him. They may not have the most competitive product, but I am wondering if there will be less/lower fees than switching to another lender entirely. Is this a sensible starting point?

Sensible to call existing lender first, means the process is quicker and less hassle.

2) Before I jump in and call them, will they care (not as in tea and sympathy ) that we split up? Clearly they would soon find out, based on what I want to ask them, but for the purposes of our current mortgage, will it matter? We have a Declaration of trust in place stating that we're jointly liable for all costs associated with the house until it's sold (when that was the plan).

They won't care. Whether you are living there or not, you are currently jointly liable for the mortgage, so they don't care about your relationship.

3) If the ex ends up staying with Skipton, will they just take me off the mortgage (for a fee, obviously) and allow him to then move to a new product, for example a 3yr fix - or is it essentially redeeming the loan and him starting from scratch with a whole new product? I understand that the Skipton will need to satisfy themselves that he can afford it,

They should allow a transfer of equity. Its a bit of legal work costs a couple of hundred pounds. If they are happy to give him the mortgage on his own they should allow him to choose from whatever deals are available to existing customers.

4) Is it best to mention the consent to let at this point? I'm concerned, not having a full understanding of BTL mortgages, that they may say he needs one - but from what I can gather, if this is his only mortgage, it should be ok to keep it as residential, is that vaguely right?

No rule that says you can automatically have your only mortgage with consent to let. They may allow it, given that its clearly a result of a break-up, they may not as the rent won't cover the mortgage. A lodger may be an option?

5) The plan is to switch to interest-only and let the house until the market rises again, potentially three years depending on conditions. Will the Skipton view switching to interest only as an acceptable/normal thing to do - or are they likely to start asking questions about why, how he proposes to replay the capital at the end of the deal etc? Basically - should I be completely upfront with them about what he's planning to do?

Upto them whether they will allow interest only, you can ask. If they answer that they want a repayment vehicle, people have been known to start an investment plan and stop it 2 months later. No harm in asking if you need one, given that the intention is to sell.

6) Comments on whether the numbers would add up, eg LTV, his salary etc?

The numbers add up for him taking the mortgage on, they don't add up on a purely BTL basis.

You need to set out what you want. You have quite a lot of asks and should prioritise them.

Start with asking for a new deal and then say that at the same time you would like to do a transfer of equity to his name. Once they send you the paperwork for that you can inquire about consent to let on a sort of "if I wanted to..." basis rather than a definite plan.

If you move mortgage to someone else you are not going to be able to get consent to let from day 1, it would have to be a BTL mortgage. As your rent - payments don't stack up that is an unlikely option.

getmore4less

dats wrote: »

Been on the market since June and nothing doing. Five viewings and no offers. Selling was our first choice, until we realised that it was probably a cr*p financial decision and if there was any way to avoid that, we should.

Rental would realise about £900-950 a month. Currently paying about £950 a month on a repayment basis - but switching to interest only would lower that, for a while until things pick up in the housing market - and we're/he's aware that that could be a way off. His salary would cover mortgage payments even if it was on a repayment basis - plus include some to put aside for repairs. He's not looking to make a profit from renting - just using it as a way to protect his investment until things improve.

If renting doesn't pan out, he is prepared to live in it, although doesn't really want to. Meanwhile, I want my cut which will free me up to move on with my life! We considered carrying on owning jointly, but as he can afford to maintain the mortgage/hopefully the rental side of things, it makes more sense for me to benefit in the short term (by taking a smaller percentage, but having it now) while he will benefit long term - by knowing that the eventual profit/decision to sell when he chooses, will be his.

Is it really such a bad idea?

Clearly overpriced,

convenient for getting your share.

He is not protecting an investment he is keeping what equity he could get out tied up in a falling asset in the hope it won't be down for too long. This stops him getting a place he would want to live in a a lower price.

It probabably worth selling at anything over £200k with rental of £950.

Could easily be 5-10 years before it sees £260k again


Look at it another way if this house was on the market at £200k would he put £40k down and take a £160k mortgage to rent it out for £950pm

this is in effect what he is doing.

dats

Clearly overpriced. Yes, well clearly, with house sales being at their lowest in 50 years, we are both aware that there would be a tipping point at which we could sell and are not so naive that we haven't dropped the price by 40k already, plus reviewed our expectations on a daily basis. It's currently priced lower than comparable properties in the area.

In fact, it's him that has decided he would rather buy me out than sell it. Naturally I would benefit from ('conveniently') getting my share, but I am happy to accept less than we first agreed, in order to do so. Currently, we are at a stalemate with me living in the property and him paying half the mortgage while he lives in a shared house. We don't want to continue in this way if there's any sensible solution. But rather than your possible insinuation that I am suggesting something other than a mutually beneficial outcome, things between us are perfectly amicable and I am not sat here rubbing my hands together, whilst cooking up some evil plan for my own money-grabbing objectives!:eek: