Joint mortgage with shares 99% vs 1%? Is this possible?

NTP

Hi all,

I am in a difficult situation and would appreciate some advice. Thanks in advance.

I am about to divorce and my wife is happy to sell her share to me from the family home. it's about 40K - lot's of money for me. I have been thinking of many options but the most sensible appears to be remotgaging the house for the money we owe now plus the 40K on top. I believe the house has enough equity to allow this. However my problem is that my salary of 45K is not enough to borrow 265K. One of my best friends offered to help with his income, which by the way is 50K, so that we can get a joint mortgage. The plan is for me to pay the mortgage and everything else but for him to sign on the papers. When better times approach, hopefully in 2-3 years, I can transfer the mortgage back in my sole name.

So the question here is whether I can take a mortgage that will have 99% value owned by me and 1% owned by him. This is just to be on the safe side. Do you think this is possible?

Also will 95K income be enough to get 265K mortgage? I have around 25k of loans that cost me around £600 per month.

Thanks

opinions4u

Each of you would be resposible for the entire debt. If you don't pay, he is liable for all of it.

It's a bad idea all round for your friend who, if not living there, could end up with a future capital gains tax issue.

Sell up and start again.

CLAPTON

can you possibily afford to pay the mortgage and pay your loans and still live?
what is your current mortgage monthly payment?
what would happen if interest rates moved up?

you are probably taking home something around 2,500
a 265k mortgage at 4% would cost about 1,400 pm and at 5% it would cost over 1,500
and you say you have other debts that cost 600 pm
so before you consider council tax, gas elec, water you are spending over 2000 of your 2500 income.

it doesn't make sense financially even before considering the points made by opinions4 us above.

sadly you need a understanding (and rich) parent who will help you or sell and start again.

laurel7172

If you do that, you *will* end up using your £40k just to pay the mortgage and be left with nothing. You won't be able to get a mortgage for your own place with that much other debt over your head, so why bother?

I assume you're trying to keep the same roof over your children's heads, and that's to be applauded. But realistically, you're going to have to wait for your equity.

NTP

CLAPTON wrote: »

can you possibily afford to pay the mortgage and pay your loans and still live?
what is your current mortgage monthly payment?
what would happen if interest rates moved up?

you are probably taking home something around 2,500
a 265k mortgage at 4% would cost about 1,400 pm and at 5% it would cost over 1,500
and you say you have other debts that cost 600 pm
so before you consider council tax, gas elec, water you are spending over 2000 of your 2500 income.

it doesn't make sense financially even before considering the points made by opinions4 us above.

sadly you need a understanding (and rich) parent who will help you or sell and start again.

Hi Clapton,
I think I can afford to pay the mortgage with all my debts together. My plans are to keep my cousin who lives with me and helps with £400 pm, also to complete the loft conversion (I did that last year and it's almost 90% done) and get another lodger for £600 pm. This will give me a nice cushion of almost £1000 pounds per month which will be enough for me to pay the mortgage. Yes, the interest rates will eventually go up and may land in the rate above 6%. Well I am only considering interest only mortgage which will probably cost me around £1300. With regards to the £600 monthly credit, I have invested the loan money abroad (family business) and I get a dividend monthly that covers pretty much all the costs.

Reading the other 2 posts makes me think that you guys probably think this guy is crazy to want that flat so much. Why not just sell and start again. Well maybe you are right, maybe I should do that. However, deep inside of me I am somewhat attached to the property. We bought the place for 250K (shaved off 10% of the price due to the financial crash) 3 years ago and paid a 25K deposit (this is my wife's money) at the time. This is a 3 bed flat Victorian conversion in Zone 2 London. The prices for this kind of place are around 300K now. In the last 2 years I have been investing in it by refurbishing the place to a very high standard and on top of all I created a 4th room (very spacious) in the attic. This has cost me around 45K so far and right now I have a 4 bedroom flat in an area located 15 minutes from all the office space in Central London, therefore renting is so easy. Looking at the grand total, we have probably brought the net price of this place to 290-300K. Estate agents are telling us that we have no problem selling it for 300K. However, all that work that I put in and the superb location of the flat and making things difficult to sell. I know that this place is probably too big for a single-to-be man but let’s be honest, what can I buy to replace it. Probably nothing. All mortgages are 20% minimum deposit and a place like mine now is very hard to secure. Besides if I sell up and rent with somebody (probably my cousin) I will still be paying around £500 per month.

Very difficult situation especially when we have decided to separate and our relationship may get worse with the time. So it’ s vital for me to make a decision now.

NTP

laurel7172 wrote: »

If you do that, you *will* end up using your £40k just to pay the mortgage and be left with nothing. You won't be able to get a mortgage for your own place with that much other debt over your head, so why bother?

I assume you're trying to keep the same roof over your children's heads, and that's to be applauded. But realistically, you're going to have to wait for your equity.

Hi Laurel,

Yes, I have a little daughter and the best school in the area is just down the road. So I am in the catchment area should I want to send my daughter to this school in the future.

Also what I am doing is not extracting money from the equity of hte place but taking the 40K cash I have invested in it in the last 2 years. the place will still gain equity with the time.

Thanks for your thoughts though. it makes me see question myself whether I am doing the right thing.

antrobus

NTP wrote: »

Joint mortgage with shares 99% vs 1%? Is this possible?

Whilst you can split the ownership of a property in anyway you like between two or more parties, if they are all signatories to the mortgage then they are all liable for 100% of the debt. So the answer is no.

NTP wrote: »

My plans are to keep my cousin who lives with me and helps with £400 pm, also to complete the loft conversion (I did that last year and it's almost 90% done) and get another lodger for £600 pm. This will give me a nice cushion of almost £1000 pounds per month which will be enough for me to pay the mortgage.

Less tax. £1,000 pounds per month will take you well over the limits for the Rent a Room scheme, so you'll have to include the rental income and associated expenses on your tax return.

NTP

antrobus wrote: »

Whilst you can split the ownership of a property in anyway you like between two or more parties, if they are all signatories to the mortgage then they are all liable for 100% of the debt. So the answer is no.
.

So are you saying that if in the future if I decide to sell or transfer in my name the person who has helped me with their income can simply ask for half of the profit? What's the point of having shares in joint mortgages then?

kingstreet

NTP wrote: »

What's the point of having shares in joint mortgages then?

That's the point. There are no "shares in joint mortgages" as each borrower is jointly and severally liable for the whole debt. The lender will get the money back from whoever it can, even if that means one borrower pays nothing and the other pays the lot.

NTP

Right, are you guys saying the best option I have got is to sell up and start from scratch?

opinions4u

NTP wrote: »

Right, are you guys saying the best option I have got is to sell up and start from scratch?

It looks that way to me. Protecting a child's access to good education would be a key factor in how you go about it though.