Mortgage transfer

Majeeko

I rent a property with my partner, my landlord has asked if we would like to take over the mortgage, as he is suffering from financial hardship and needs a lump sum of money. His offer is this: He adds our names to the mortgage, we pay him a lumpsum of 20-25k (yet to be decided) we then get a solicitor to draw up a contract stating that he wants nothing more to do with the property with his name then removed from the deeds. I have no idea about mortgages so I need some advice on if this is a good deal or not. It is an interest only buy to let mortgage with 207k lent in equity initially and 18 yrs left on the mortgage. At present the interest is 5.4% and will be revised in 2010 to 1.65% above base rate. We currently pay £1000 PCM and the mortgage payment would be a few pounds more each month. The property is a maisonette with a large garden, three bedrooms, first floor with garage to the rear located in SW16, London. It was valued in 2007 at 280k. As my partner and I don't have the best credit but without any ccj's and defaults etc we think it may be the only chance we get in the next few years of getting onto the property ladder. Is it ok for us to live there on a buy to let mortgage and is this a good deal given our circumstances?

Thank you

beecher

The lender would have to agree to you taking on the mortgage - your landlord can't do it through a solicitor. The lender would have to be happy that you have the income to take on the mortgage, and would also want to know how you were planning on repaying the actual mortgage. They'd also credit check you.

I'd run a mile personally, but I don't think it is a serious goer anyway.

Mrs_Bumble

What sort of financial hardship?

Is he paying the existing mortgage?

If he did manage to put you onto his mortgage then he would still have to be on the deeds and whilst he was on the mortgage would still have a material interest on the property, plus also as part owner he could still secure debts on the property.

When you say you don't have the best credit what do you mean?

The mortgage is on interest only because of being a buy to let property, so if it remained on interest only the balance would never decrease and how would you repay at the end of the term?

Whilst you rent, if you lose your job or long term sick you would get help with your rent payments, if the same happens whilst you have a mortgage and two other people are on the mortgage you are not going to qualify for much help at all.

Lender is probably not going to be happy on a number of factors but a buy to let mortgage is to let out to tenants, not to have the owners live in it, as they are unregulated mortgages.

It all seems a bit iffy.

beecher

Just to add, where would the 20 - 25k be coming from?

Majeeko

We earn just over 50k a year so could afford the repayments. The 25k would come from savings and help from parents. At present he is still paying the mortgage and we have the forms from his lender to fill in to be put on the exisitng mortgage.

We wanted a contract drawn up from an independent solictor once we have been accepted onto the mortgage to waive any claim to the property he may have.

Over the few years we have been togther there have been probably several instances where both of us have paid credit cards and phone bills late, but they have always been paid without defaults being registered against us.

Taking into consideration the current climate we worry that we have been throwing away 12k a year with nothing to show for it really.

We would repay at the end of term by selling or perhaps pay lump sums each year if that was a possibility. Obviously, we also hope that as time goes on, our salaries will increase.

Majeeko

Just to add he also owns a few other properties which are currently empty so is struggling to pay mortgages on them. He has started proceedings to sell some of them.

We thought this might be a solution as we would avoid stamp duty and would be more likely to get the mortgage. If mortgages are available to us, we would reconsider and buy e;sewhere but we are aware our deposit isn't what places are asking for at present.

beecher

I don't see how you would be more likely to get a mortgage as the lender will make the same judgement as they would on a new application. Your plans for repaying the capital seem vague - your lender will want to see a repayment vehicle in place.

MarkyMarkD

This is a total non-starter.

If he was making a legit offer, he would simply sell you the property and you would get a mortgage.

If you do what you are proposing, the lenders will underwrite you at the stage you try to take over the mortgage. And if they would accept you, you should get a normal mortgage and simply buy it.

Is he simply trying to avoid Early Repayment Charges on his mortgage by this complex device, or is he stitching you up completely?

By the way, you cannot get added onto a BTL loan if you live in a property - you are not allowed to live in a property that you have a BTL loan on.

Mrs_Bumble

I feel that adding you to his mortgage and getting you to pay a lump sum etc is just a bit underhand, if he remains on the mortgage, he remains on the deeds, now if for some bizarre reason the lender did put you on the mortgage what happens then? You now have the pressure of the debt, he is still on the mortgage so you are only a third owner (two thirds between you) nice deal for him, gets to keep control of his property and two other people responsible for the mortgage as well?

Why do you think that you won't get a mortgage? Beecher is quite right when he says that the underwriting process would be the same to add you to a mortgage as take one yourself?

You say £50K between you, any other credit committments? This sort of income is not enough to sustain a mortgage that size.

Get a deposit together, repair what ever damage has been done to your credit history and wait and buy something that you can both afford.

This just all seems a little iffy? The landlord if he was really keen to help would just sell the property under value, that way he gets off the mortgage and the money in his pocket, you giving him big lump sum and then going on to the mortgage just puts a lot of risk on you without any benefits? Again a joint income of £50K is not enough to sustain a mortgage of £207K. Be very careful.