Do I need to remove my sister from my mortgage?

shirlls

I had a joint mortgage with my sister, she moved in with her boyfriend 5 years ago so I took out a 5 year fixed rate mortgage on the property (leaving her name on the mortgage) to pay her off. The house was too big for me alone so 4 years ago I moved to a smaller property and transferred the mortgage over to the new property.

The fixed rate is now coming to an end and my broker has told me I may have to pay a solicitor to remove my sister's name from the mortgage. I'd rather not do this as I don't want to incur unnecessary costs. Do I have to remove her from my mortgage and, if so, does anyone know how much this will cost?

My sister doesn't contribute to my mortgage and has a mortgage of her own with her boyfriend.

StuC75

Does your sister want removing from the mortgage? given that she is Joint and Severally liable for the payments in the event of you being unable to pay?

Is your earnings sufficient to cover the mortgage amount in terms of multiples? (distinctly different to the fact that you make the payments on your own).

shirlls

My sister doesn't mind if she's left on the mortgage or taken off, the only reasons I've left her on it is the cost and due to being a smoker, I expect to die first so she'll have less trouble selling my house if her name's on the property.

I can't see that I would ever be unable to make the mortgage payments, but if that did happen I'm sure my sisters and brother would help me out as much as they could.

My earnings are sufficient to cover the mortgage amount

StuC75

In that case best to do whats suits you best financially then. If you are changing lender then there wouldnt be any cost in taking her off the mortgage would be a new application in one name.

Regarding assistance with payments - many may prefer helping through 'choice' rather than through obligation \ 'commitment'..

CLAPTON

presumbaly she is on the mortgage and on the deeds?

as you aware of the tax issues as she presumbly legally owns half the house?

holly_hobby

StuC75 wrote: »

If you are changing lender then there wouldnt be any cost in taking her off the mortgage would be a new application in one name.

Unfortunately thats incorrect.

The removal of your sister from the mortgage and property deeds. is referred to as a Transfer of Equity (TOE), and doesn't qualify for free legals on the fee free remortgage packages you see marketed.

Cost of a TOE is circa £300-£400 depending upon where you are in the UK. (this would also apply if you stay with your current lender and effect the TOE, with the possible addition of an admin fee by the lender).

In that case, and if you want to change lender, you may be better seeking a remortgage with fees, as there will be little difference to the cost of legals which inc the TOE, but you should see a lower payrate that that offered with the fee free products.

If you want to change lender (and assuming your income v commitments is sufficient to meet the lenders affordability requirements), seek the services of a whole of market broker whom will source the most suitable lender and product for your needs and circs.

Re Tax....

This would only come into play for her (CGT), if applicable market value exceeds her share of the original pch price/cost of purchase ie 50% (if held as joint tenants). To which she can offset her unused CGT annual allowance, PPR relief, and acquisition costs, with liability due (via annual return) on any residual amount.

And on you (SDLT) if the transferred amount of consideration (money, goods and/or transfer of mge debt) exceeds nil rate band of 125K.

The TOE re your sister (if income stacks up), is a personal one - but whilst she remains party, she is legally entitled to an equal share of the free equity on disposal, whilst (along with you), she is legally responsible for servicing the mortgage. Of course any mge application made by her, where her income is reqd for servicing, would be naturally affected by her co-mortgagor status with you - ideally and to be fair, I would remove her if possible.

I understand your concerns re your passing and wishing her to have the property on your earlier death. This can be achieved, with speedier settlement of the estate, by effecting a life assurance policy (and those for funeral provision) in trust for her, with the bequest of the property to her via your will. A solicitor will be able to assist.

Hope this helps

Holly

CLAPTON

cgt is liable upon the disposal of an asset and is based on the market price less purchase price less reliefs and allowances

shirlls

CLAPTON wrote: »

presumbaly she is on the mortgage and on the deeds?

as you aware of the tax issues as she presumbly legally owns half the house?

I'm guessing that if she's on the mortgage she will be on the deeds

No, what are the tax issues?

StuC75

holly_hobby wrote: »

Unfortunately thats incorrect.

The removal of your sister from the mortgage and property deeds. is referred to as a Transfer of Equity (TOE), and doesn't qualify for free legals on the fee free remortgage packages you see marketed.


Hope this helps

Holly

what about moving the mortgage elsewhere as a New single applicant...

shirlls

holly_hobby wrote: »

Unfortunately thats incorrect.

The removal of your sister from the mortgage and property deeds. is referred to as a Transfer of Equity (TOE), and doesn't qualify for free legals on the fee free remortgage packages you see marketed.

Cost of a TOE is circa £300-£400 depending upon where you are in the UK. (this would also apply if you stay with your current lender and effect the TOE, with the possible addition of an admin fee by the lender).

In that case, and if you want to change lender, you may be better seeking a remortgage with fees, as there will be little difference to the cost of legals which inc the TOE, but you should see a lower payrate that that offered with the fee free products.

If you want to change lender (and assuming your income v commitments is sufficient to meet the lenders affordability requirements), seek the services of a whole of market broker whom will source the most suitable lender and product for your needs and circs.

Re Tax....

This would only come into play for her (CGT), if goods or money are exchanged in respect of the consideration, exceeding her share of the original pch price/cost of purchase ie 50% (if held as joint tenants). To which she can offset her unused CGT annual allowance & PRR relief, with 40% due (via annual return) on any residual amount. If nothing is exchanged (which I think is the case, there will be no CGT liability)

And on you (SDLT) if the transferred amount of consideration (money, goods and/or transfer of mge debt) exceeds nil rate band of 125K.

The TOE re your sister (if income stacks up), is a personal one - but whilst she remains party, she is legally entitled to an equal share of the free equity on disposal, whilst (along with you), she is legally responsible for servicing the mortgage. Of course any mge application made by her, where her income is reqd for servicing, would be naturally affected by her co-mortgagor status with you - ideally and to be fair, I would remove her if possible.

I understand your concerns re your passing and wishing her to have the property on your earlier death. This can be achieved, with speedier settlement of the estate, by effecting a life assurance policy (and those for funeral provision) in trust for her, with the bequest of the property to her via your will. A solicitor will be able to assist.

Hope this helps

Holly

My Broker has looked around and quoted me £500 to remove my sister from the mortgage. I'm going to HSBC tomorrow so I'll see how much they say. I think the best option is to remove her, she's just got a new mortgage and I'll bet she's forgot her name is on my mortgage. I don't have any life insurance as I don't have any dependents but I already have a will and she's named on that.

shirlls

StuC75 wrote: »

what about moving the mortgage elsewhere as a New single applicant...

I will be moving my mortgage as my current provider's rates are not competitive.

So, if I just say I want a new mortgage in my name only, that'll solve the problem?