Removing a name from joint mortgage account?

OnlyMe_08

I'm not sure if this is the right place to ask, but hope someone will be able to provide advice & guidance into the easiest and most effective way to remove someone from a joint mortgage account.

This is not the typical married / divorce scenario, but four people on a joint mortgage where all occupy the property. One has now decided to remove their name from the account - how exactly should this be done? However, that person will continue to live at the property as a tenant until another property is found (effectively paying the same amount on rent as did with mortgage).

Is it a simple matter of going through solicitors, re-mortgaging or notifying the mortgage lender?

Is it based on the equity of the property if it was to be sold now, or based on prior years' contribution towards the mortgage - how will the share be calculated and what needs to be considered / taken into account?

We're into around 10.5 years of a 25 year mortgage.

Thoughts & advice on the best approach would be appreciated.

Thanks.

OnlyMe_08

Thinking about it, I think this thread should move to the other forum, sorry!

Could a mod do the honours please....?

glitterjunkie

Hi - I work for a Conveyancing solicitor so hopefully can help a bit!

You need to speak to your lender first of all to make sure they are agreeable to one of you coming off. Some lenders will do an affordability check on the remaining three and they do reserve the right to refuse (however if there's still three of you left then this is unlikely). You also need to inform your lender that there will be a tenant in the property. It's against a lot of mortgage lenders terms and conditions for you to let the property in any way without their consent so you're likely to have to get specific permission.

Once you've spoken to them you'll have a better idea of how to proceed. Your lender might agree to a simple 'change of parties' application whereby you just change four names into three, which is the best way to do it if they allow you to as it's nice and simple. However they might insist on a re-mortgage, which is a bit more complicated as the current mortgage will need to be redeemed and a complete new mortgage offer issued to the remaining three. They may even insist that the new mortgage is a specific buy-to-let mortgage if there's going to be a tenant in it.

You'll definitely need a solicitor or licenced conveyancer if it's a remortgage, and they can also deal with the Transfer from four names into three at the Land Registry for you (assuming it's registered and held in all 4 names?). If it's just a change of parties then check with your lender if you need a solicitor for the mortgage part, but you're still likely to need one for the Transfer part. It's a waste of time going to see a solicitor before you've spoken to your lender first though

Is the fourth person buying the others out? Do you all hold the property in equal shares? If so it's probably worth getting a couple of up to date valuations done by an estate agent so you know exactly how much money is involved

OnlyMe_08

Hi glitterjunkie

Thanks for the advice given - some useful information there.

Yes, everyone has an equal share. It just means that the forth person would come off, but the remaining three continue with the mortgage.

OnlyMe_08

Any further thoughts or advice please?

Land_Registry

If the property is in England & Wales and registered in all 4 names then, like glitterjunkie, I assume you will be completing a Transfer from 4 to 3 to transfer the legal ownership.

In such cases the mortgage can remain in place although the issuesa round releasing the 4th person from the terms of that mortgage would need to be resolved with the lender as suggested.

Either way the lender is very likely to insist on your using a conveyancer to complete matters.

Transfers subject to a charge (known in legal terms as a transfer of the equity of redemption) will often contain covenants with regards the responsibilities of the remaining owners/borrowers and/or any terms of variation of the charge itself (often lenders will seek to replace old terms with new ones).

As glitterjunkie states though best to speak to the lender first and go from there

OnlyMe_08

Land_Registry_representative wrote: »

If the property is in England & Wales and registered in all 4 names then, like glitterjunkie, I assume you will be completing a Transfer from 4 to 3 to transfer the legal ownership.

That is indeed the case.

I've had a quick chat with the lender, and as you said, we'll need to complete a Transfer of Equity agreement.

However, considering our circumstances...

• continuing with mortgage with approx. 15 years remaining (we're not selling property)
• the forth person has been living at the property during the first 10 or so years (no rent)

... will the person coming off be entitled to any financial benefit?


Thanks again for any advice.

muddywhitechicken

OnlyMe_08 wrote: »

... will the person coming off be entitled to any financial benefit?

I would have thought 25% of the equity at the current value unless you have a legal agreement stating otherwise.

Did you not discuss this scenario when you were buying the house?

OnlyMe_08

I thought there may be some aspect of equity involved, but not being familiar with mortgages I thought I would ask here to see what the processes were and what financial implications there may be.

So would anyone be able to provide a worked example / illustration the financial side, in terms of what the the forth person will be entitled to (if this was you, what would you expect), bearing in mind the following?

Let's say the current value of the property is £200K and there's £90K remaining on the mortgage (original was say £130K)
We are 10 years into a 25 year term
All joint mortgagees live at the property (so the leaving person has not paid rent)

SuperSecretSquirrel

Is it not as simple as 25% equity?

= (current value - outstanding mortgage) / number of stakeholders
= (200k - 90k) / 4
= 27.5k

Assuming you all stumped up the same amount as a deposit, made equal payments towards fees etc, and have all made equal repayments throughout, I don't think it needs to be any more complicated than this?

Beckyy

I would expect the other mortgage holders to buy me out with 25% of the current property value (definitely not just 25% of the equity in it) - so £50,000 if the property is worth £200,000

That is assuming that everybody put an equal amount into the deposit, if not then the amount should be increased/decreased accordingly by the percentage of how much they put towards the deposit originally.

There's a huge difference between 25% of the equity in the property and 25% of the value. I wouldn't say 25% of the equity is a fair deal for the person leaving unless everybody is happy with it.