Joint vs Single Mortgages and Equitable Interests

[Deleted User]

Hello and Good morning!

I started a thread over here (http://forums.moneysavingexpert.com/showthread.html?t=1962663) asking for advice because I own my own business and I'm looking to get a mortgage in the next 6 - 12 months, but because I have only been trading since May it's unlikely that any lender will look favourably on me.

This gives rise a couple of questions that I wonder if people would be kind enough to help me with.

My girlfriend is living in a property for which she has a flexible interest-only mortgage with A&L. The mortgage was for £205k and the house is - based on valuations of the neighbour's (identical) properties, probably worth around £260 - £270k. However, assuming the stamp duty threshold puts buyers off, we'll assume it would sell for £249k (so, equity of just over £40k).

We have seen some very nice properties in a lovely area that we would like to move to - and we're looking to move to a property in the value region of £300 - £350k.

Between us, we have £50k deposit excluding the equity from her current house and our ideal goal would be to get a joint mortgage, but if my self-employment is a problem, could someone answer the following:

- Firstly, is it possible that my girlfriend could 'extend' her current mortgage and transfer it to a higher-value property, or would she need to get a new mortgage for this purpose? She over-pays on an interest-only mortgage (and is, in effect, making quite substantial repayments of £1.5k per month). One of the properties we liked was on the market for £315, so once your remove our deposit (£265k) and any equity from the sale of her existing property (£225k) it means that her current mortgage of £200k is short by £25k. Is it likely she would be able to 'top up' her mortgage and transfer it to cover this (she has a perfect credit rating - 999 - and has never missed any payments in her life; good salary etc).

- Secondly, if my self-employment makes it a real problem getting a mortgage, is there anything wrong (e.g. prohibited, unlawful) in her applying for a single mortgage for a new property instead? e.g. if we both intend to live there together, but I complicate the mortgage (i.e. having me on the mortgage will increase the interest rate) would she have to apply for a 'joint mortgage' on the basis that a lender might consider it a fraudulent application otherwise (in the legal situation that if she defaults, I would have an equitable interest in the property preventing them from foreclosing the mortgage - estoppel, right? - and we didn't disclose that to them via a joint mortgage application)?

- Finally - and I hope I haven't lost you by this point - is it possible for my other half to get the mortgage in her name, but for both our names to be on the title deeds - and for me to have my 50% contribution to the mortgage payments recorded in some way so that - for legal reasons and also my own protection should (heaven forbid) something happen in the relationship - my 50% contribution is noted and if the house ever had to be sold, my investment and equitable interest would be protected?

...very complicated I know! It's just very frustrating the whole process. I earn a decent amount of money, my business is going really well, but just because I don't have two year's worth of accounts I'm penalised, even though I earn over twice what I did in my previous PAYE employment!

[Deleted User]

Can anyone help please?

getmore4less

First she needs to talk to her lender.

Is the current mortgage portable?
Will they lend her more money say around the £25k.
(this will be on new terms not the old ones)

How much does she earn? is it enough to cover the income requirements of the lender for borrowing around £225k.
(are you sure she still owes £200k if overpaying by £1.5kpm)

Anyway if these are both possible you have a way forward with her buying the new place(if the old one sells).

The lender will not be happy with you on the deeds so you will need to protect your interest another way, this is possible but the mortgage company get their money first, so you could lose the lot if prices drop so put this possibility into your plans.

Remember any money put in buys a share of a variable priced asset.

The real problem with any split(relationship not equity) is how one person buys the other out this is usualy not possible without a sale unless there are more savings in the background.

Back to the mortgage, if it is not portable then you will need to look at new deals so again will they lend based on her income?

If not it is a joint application to see if anyone will lend.

Probably need a good broker for that.


On the equity split I think it is easiest if things are kept 50:50(irispective of incomes) so :
same money in as deposits and share the purchase costs(and maybe the selling as well).
Pay 1/2 the mortgage.
pay 1/2 the capital investments.
get 1/2 the money(after costs) out when sold.

Any other ratio can cause issues.

If you have different incomes and want to reflect that then do it with running costs, like one pays more on the bills or holidays and keep this seperate from the house as an asset which stays 50:50.