Mortgage Express – Transfer of Equity

canadel1983

Hi there,

I just wondered if someone could explain the process forwhen you apply for a transfer of equity.

In a nut shell:

My husband and his ex broke up 9 years ago and she continuedliving at the house on interest only.
As the house is in negative equity they still can’t sell.
She can’t afford to take sole ownership so tomorrow we areapplying for a transfer of equity to my husband/myself.
My husband has good credit score almost very good, I have afair credit score almost good.
We have no over drafts, no personal loads, one credit cardthat isn’t maxed out, I have one old default that was paid off 5 years ago, wedo both have car finance. Our salaries meet the cost of the current mortgageamount.

I am hopeful that we will meet the affordability checks (althoughreally worried as this is our last option and if this doesn’t work we don’t knowwhat to do as we cannot buy without my husbands lending ability being free).After that this apparently goes on to the ‘under writers’ for approval. Cansomeone explain to me what this actually means. How likely is it to pass theaffordability checks and not be passed by the under writers? When you do atransfer of equity do they request your bank statements etc as if you wereapplying for a mortgage for the first time? Also, do they do the checks based on thecurrent terms ie interest only or repayment (which is what we would want tochange it to but im thinking we do this at a later date). Im not looking forsomeone to reassure me that it’ll go through as I know this is impossible topredict, I just would like to know the process ready for tomorrows phone call!


Thanks in advance

Susanne

Gmask21

Hi, my brother and I own a house together and he is looking released from our mortgage to enable him to buy a house with his fianc!. He hasn't lived in our house for many years now and I do so we have been looking into how we can transfer ownership of our house to me.

I came across Transfer of Equity just yesterday and phoned my mortgage provider to find out about it. We are in the same position as yourself as in our mortgage has been interest only for a number of years.

My provider said that they do check income v's outgoings to see if we can afford the payments and they do credit checks also. I asked if it made a difference that the mortgage was interest only and the guy said as long as I can prove I have something to cover cost of mortgage ie- the house. So this is where your negative equity may come in to play - I'm not sure tho as this is all pretty new to me and I am paraphrasing what the call centre guy said.

I will keeping a close eye on this thread as I have a keen interest in this issue at the moment.

canadel1983

Me too, nightmare situation, just praying that this works!!

canadel1983

Ok so done the affordability checks today and we passed, it was tight though, we had to take into account how much new tyres would cost for our cars if we needed them and bolt ons to our sky package such as Netflix!! We earn a good combined wage and the mortgage isn't even massive!

Anyway, it's gone across to the underwriters with positive recommendations from mortgage express, god knows if we will be passed so it's all up in the air. there's every chance that we could get decline based on our credit reports....

The bit you mentioned about having something to cover the house payments was discussed and they wanted it to be on a repayment mortgage and we need to have a life insurance policy in place too, they wouldn't do it for interest only xx

Gmask21

Thanks for the update! Brilliant that you've got past the first step! I hope the next step goes as well!!

just to be clear, you've had to go repayment now, they wouldn't let you keep it interest only? Was that because the house is in negative equity?

I can't believe they even asked about possible bolt ons to sky, tyres I can understand.

I'm not sure about asking them if I can do the equity transfer based on the interest only or go back to repayment. If going back to repayment I will also need to extend the tenure of the mortgage too, as my loan value against the time left on mortgage would mean high enough repayments. Maybe I could get them to consider both.

its such a minefield, I don't want to do anything to lessen my chances.

The mortgage on the house in £99,000, I earn £1718/m after tax, my out goings are a total of £1201 which is inclusive of the £400 interest only mortgage payment. That leaves me with £516/m. If I go up to repayment of aprox £600/m then it will leave me £316/m. I'm not sure if that's within the threshold of what's acceptable under the affordability test. I don't know if your experience can give me any view on this?

It's hard to know but I'm going to leave it a month or 2 before applying as I want to tidy up a few things in my account first like stay out of my overdraft, pay my last remaining debt off next month.

Thrugelmir

Gmask21 wrote: »

just to be clear, you've had to go repayment now, they wouldn't let you keep it interest only? Was that because the house is in negative equity?

The lender will require a repayment vehicle for the mortgage. For around 96% of new applicants. That now means a repayment mortgage as they have no alternative plan or options.

The mortgage on the house in £99,000, I earn £1718/m after tax, my out goings are a total of £1201 which is inclusive of the £400 interest only mortgage payment. That leaves me with £516/m. If I go up to repayment of aprox £600/m then it will leave me £316/m. I'm not sure if that's within the threshold of what's acceptable under the affordability test. I don't know if your experience can give me any view on this?

Lender will base affordability at a notional interest rate of 7%. Extending the term is an option.

canadel1983

Pretty much what the last person said!!

An Option we had (but didn't go with) to free up my husbands lending was to gain consent to let from the mortgage company. SOME lenders are willing to free up lending if your other mortgage is covered by rent from a tenant. My husbands ex was too difficult to do though.

I REALLY REALLY hope this works out, for you guys too x

canadel1983

Ps

Our affordability was based on a 3% stresser rate not 7 x

Thrugelmir

canadel1983 wrote: »

Ps

Our affordability was based on a 3% stresser rate not 7 x

Guidance is now 7%. Not a mandatory rate. But what the FSA recommends.