Saving Money by Transfer of Equity

ukmarkwilson

Hi gang,

Our residential mortgage is up for renewal soon and, obviously, we want to get the best deal possible.

The current mortgage is jointly in my wife and I's name - however, we are both a little concerned about our job security at the moment and aren't earning as much as my Dad.

I was thinking about transferring the equity of the house to him (i.e. putting the mortgage in his name) to a) ensure that if we lose our jobs we still have a house until we find employment and b) might be able to secure a better mortgage deal as his earnings are higher than ours combined.

Does this sound sensible? Is this something that anyone else has experience in doing? If so, any advice?

Cheers,
Mark

_Andy_

Just to clarify - does your Dad live there as his main home?

ukmarkwilson

No - my Dad lives elsewhere. My wife and I live in our flat but I believe he was the guarantor on the original mortgage application.

_Andy_

So what you're proposing is selling the flat to your Dad so that there's no risk to you if you lose your job?
How does he feel about that?
Does he already have a mortgage on his main home?

Is this something you really want to do or would you prefer the mortgage was just in your names?

ukmarkwilson

I wasn't thinking of selling it to him - just transferring the title / equity / mortgage to him. He does have a mortgage on his main home. I haven't asked him yet but I know he'll be totally fine with it once I explain our thinking behind it.

Mrs_Bumble

By transferring the title etc you are effectively giving it to him. Would have no legitimate claim on it, it would become part of your dad's estate and then anything could happen to the property!

Your dad would be perfectly fine with taking on the responsibility of another mortgage! If you don't pay him what effectively would be rent then he has to find the mortgage money or face proceedings, he could lose his good credit rating and cause him a lot of stress.

If you are worried about job security take out mortgage payment protection insurance, as long as you both are not under notice of redundancy or have knowledge of impending redundancy then gives you security.

I think it would be mad!

So what would your plan be if you did go ahead with this idea and you lost your job try and claim housing benefit to pay the rent?? To my knowledge you can't claim benefit if you are renting from a relative.

ukmarkwilson

I'm sure my Dad would be fine with the whole arrangement.

The truth of the matter is this; my mum died and after we sold her house, my sister and I had a lump sum of money. My wife and I found a flat we wanted to buy to rent out and paid the deposit on it 2 years ago. Since then, the market's gone to hell in a handcart and we can't get the finance to complete. The builders are threatening to take us to court (despite the fact I told them we would struggle to complete before they sent the completion letter and that I made several suggestions about how we could complete that they rejected). As we don't have the money to pay any potential penalties, it is possible that they would place a charge on our flat. As our residential flat is jointly-owned and the new flat is in just my name, if I transfer the equity to my Dad, the builders can make no claim against the property.

I was looking into the equity transfer for the reasons originally listed as both companies that my wife and I work for have done and are going to proceed with changes to the workforce. There is a very slight risk that our jobs may be at risk - as the main income earner, for me, the risk is negligible to non-existent but for her it is slightly greated. Plus our mortgage is up for renewal shortly and this might be a good way to find a better deal.

Mrs_Bumble

I think you were looking for equity transfer because of the above reasons and not those originally stated.

The builders will still come after you.

I feel sorry for your dad.

ukmarkwilson

Mrs_Bumble wrote: »

I think you were looking for equity transfer because of the above reasons and not those originally stated.

The builders will still come after you.

I feel sorry for your dad.

Thanks very much for your insight.

"I feel sorry for your dad"? That's very nice.

Conrad

It won't work. A transfer is a sale, so he would have to reside in order to get a competetive residential rate.

Guarantor wont work now afterall we have a credit crunch.

He could do it as buy to let, but the criteria is very strict indeed, and the rates and fees arent too clever, plus maximum borrowing about 70%.



All the best

Mrs_Bumble

You are looking at this from your point of view but you are not thinking about the long term effects for your dad? Am I wrong? If things go wrong and the mortgage doesn't get paid it is your dad that will take the heat.

Plus I think that you need to think about your property becoming part of your dad's estate, which it will if you transfer the title into his name, it no longer is yours or your wifes. Does this present IHT issues for your dad's estate? You and your wife no longer have the asset.

You need to deal with the builders and take legal advice to get it sorted rather than trying to avoid it. Have you been back to the solicitor that allowed you to exchange, to see if they can renogiate a more reasonable purchase price now, rather than the builder go through the hassle of trying to chase you down for the money.