Advice Please - 3-way mortgage

lcheater

OK, I am looking for some specialised advise regarding my mortgage.

Basically, I am in a strange setup whereby I live with my nan, granddad, mum and brother and sister. !We moved into the house in June 2006 when the house was worth £295,000. !My nan and granddad put down £245,000 cash and we arranged a £50,000 mortgage. !The mortgage was intended to be solely in my name, and I would be paying it every month. !However, because my nan and granddad put so much equity into the house, they wanted to be on the deeds, and because of this, they had to be on the mortgage too. !So, we arranged a 3-way mortgage between my nan, granddad and myself. !My nan and granddad are both retired and have no earning power apart from their basic state pension, so, as previously mentioned, I have always paid 100% of the mortgage payments every month since we moved in.

We had an agreement / declaration document written up by our solicitor when we moved in to say that I own 17.5% of the house (that’s what £50k out of £295k basically equates to) and that if the house is sold, I would get 17.5% of the sale value but out of that money, I would have to settle the mortgage. !So, basically, the longer I stay in the mortgage, the more I pay off; hopefully the house will have increased in value and I would end up making a few thousand from it.! That was the idea, to help me get some money out of it (as well as helping family out).

Anyway, that’s the overall basic setup and agreement – what I would like to know is this…

I want to break away from this arrangement / setup ASAP (not desperate, but as soon as it becomes viable – approximately 3 years time I estimate), to purchase my own house with my girlfriend.! What I need to know is, what options (if any) are available to me to transition between my current mortgage onto a new mortgage for a new house…! Bearing in mind the mortgage I currently have is my first ever mortgage which means I have no experience of moving mortgages with moving house – or whether it can be done or not?! Is there any way I could time it or co-ordinate things that means I wouldn’t need to stump up a deposit?

I don’t expect to be able to get a new mortgage on a new house if I still have a mortgage on this one, which means to be able to move out, I would have to clear my name from the current mortgage. !Can I do this easily, given that it is a 3-way mortgage (can I declare I am out – with the agreement from the 2 other parties of course)? !This would then disconnect me from this mortgage wouldn’t it?

Obviously I am not going to put my family on the street by any actions I take, but at the same time, my family are supportive (and always have been) of me wanting to have my own place.

I know there are lots of questions in this post, and for people to really give accurate advice they would need to know more detail, but at this stage I would like to know what overall options I potentially have.

Thank you for taking the time to read.

luckyfool

The only way you can come off that mortgage is if someone else who can service the mortgage is on it. It sounds like your grandparents can't so unless someone else comes on the lender will tell you to take a hike. Your grandparents might be able to remortgage it onto an equity release scheme to "buy you out", and as this would not need them to make payments affordability would not come into it. However this would mean that their equity in the property would be eroded by the interest being added to the loan.

lcheater

luckyfool wrote: »

The only way you can come off that mortgage is if someone else who can service the mortgage is on it. It sounds like your grandparents can't so unless someone else comes on the lender will tell you to take a hike. Your grandparents might be able to remortgage it onto an equity release scheme to "buy you out", and as this would not need them to make payments affordability would not come into it. However this would mean that their equity in the property would be eroded by the interest being added to the loan.

Thank you for the hasty response :-)

CLAPTON

what's the financial position of your mum, brother and sister?
whats your own income?

lcheater

CLAPTON wrote: »

what's the financial position of your mum, brother and sister?
whats your own income?

Sister is 17 goes to college full time and works part time.

Brother is 23 works full time as a salesman, so low basic salary is boosted by commission

Mum works 30 hours a week but is maxed out paying house bills etc.

My income is £37100

dimbo61

You dont state how much is still outstanding on the mortgage after 4 years ?
Can you overpay to reduce the mortgage over the next 3 years and then maybe mum,brother and sister can take over the mortgage balance

lcheater

OK, first of all, apologies for opening this thread and then not replying consistently.

The balance on the mortgage as of today (almost 5 years into it) is just over £46000 and I am currently in a fixed payment option at 5.04% until June 2016. The suggestion of over paying is not an option because, as soon as I move out I will want my share of what I have paid off the mortgage, so I would need to be “bought out” – i.e the house would either be sold and I would take my money from that, or it would need to be re-mortgaged to pay me.

I have just been on the phone to my mortgage company to ask them what options I have available. They said I can have my nan and granddad removed from the mortgage, move the mortgage from the current property onto a new property (i.e my own place), and re-mortgage it, basically all at the same time. They would still require a minimum of a 10% deposit though if I remortgage. I cant see how this would benefit me, apart from avoiding the early settlement fees I would incur for settling within the fixed payment agreement. Also, I would still have the £50k to pay ON TOP of the new house price, which is exactly the opposite of what I am trying to achieve! So translating what the mortgage company have said – they cant help! Lol.

We are getting the house valued after Christmas, to get some idea of how much money we have to play with (no one in my family has spare income / savings). Does anyone have any statistics for house prices between 2006 and 2010? I know they dropped a lot, but I haven’t been following it closely, so not sure if they have recovered back to 2006 prices, or exceeded them? I would love to think it had increased £50k, as that would leave me with around £15-16k to use as a deposit on my own house, but an 18-19% increase in 5 years? Hmmmmm probably not realistic! Although we did get our house in a massive state and have completely re-decorated throughout, so you never know! Worth hoping for I guess! Lol

The other question I keep mulling over in my mind is should I rent? I absolutely despise the word RENT – to me, it is like getting a stash of notes every month and setting fire to them – you walk away from rented property with….. NOTHING! However, I have read that it is not always as simple as this.

PasturesNew

Go to http://www.zoopla.co.uk to get a guesstimate of value. Type in your postcode and click on the "home value" radio button and then search and it'll guesstimate the current value based on the ups/downs of prices in the area since you bought it.

The bottom line is that you probably have only 4 options:
- sell it entirely and all divvy up
- find somebody else in the family to take on the mortgage, by getting themselves a mortgage to buy your part.
- pay it all off in full yourself
- forget it

If you're trying to get rid of the £46k debt, the only way is to pay it off. That means either you have to pay it off, with cash - or - somebody else has to buy your part of the house from you, which settles your mortgage and they then have their own/new mortgage. Because it's a small portion of the house people are living in, this has to be somebody in your family as nobody else would ever buy that portion from you except somebody with a keen interest/desperation to keep the family together.

Conrad

lcheater wrote: »

They said I can have my nan and granddad removed from the mortgage, move the mortgage from the current property onto a new property (i.e my own place), and re-mortgage it, basically all at the same time.

And this sort of 'adviced' is why brokers exist. Lender staff do not have a clue with complex sits like this.

1) If you remove gran and grandad from the mortgage, where will they live? Abbey turned a client down (direct - not via me) as they realised at the last moment that grandparents would still reside and have considerable rights (for example if had to go into care) and the usual property waiver was insufficient.

2) Your Brothers earnings will be scrutinised by new lender as he is mainly on commision.

lcheater

I didn’t for one second think the person I spoke to at the Mortgage company knew my exact situation, or knew what I was trying to achive. So I did take it with a pinch of salt to be honest, and it wasn’t until I ran back through what she told me, I realised that she really didn’t know what I want! Lol

1) Under no circumstances will I let anyone who currently lives in the house become homeless / stuck for somewhere to live. I think the idea of removing them from the mortgage was that it would then be my sole mortgage and I could move that mortgage to my new house. The house it is currently on would be un-touched, it would effectively be completely paid for, because the mortgage would be moved from that house onto the new one. However, as I previously mentioned, simply moving the mortgage so that is follows me to my own property is completely the opposite from what I am trying to achieve here!
2) I think its safe to count my brother out of this one – regardless of whether he could afford the mortgage, he has already indicated that he wouldn’t want this financial commitment (I think he would probably end up moving out and renting somewhere on his own if it came to it – its just the way he is).

It seems increasingly likely my only option is to get removed from my current mortgage (either my name be removed from it, or the mortgage needs to be settled by selling the house). Then I can start the whole process of buying my own place from scratch, as if I am a first time buyer. This leads me to another question – would I be considered a first time buyer, if I have had a mortgage previously? If not, can I use my existing 3-way mortgage to my advantage when buying a place of my own? i.e avoid setup fees, deposits etc?

getmore4less

So did your original agreement take account of this senario of you wanting out?

If none of those living in the house can fund the debt then you are stuck with this mortgage.

You can't move it to another house without it getting paid off.

Your only way out is to sell up and move on.