Upsizing and ownership advice

TJ&me

Hello all,
I currently have a mortgage on a one-bed flat. My family is growing and my wife and I would like to upsize. I'm fortunate enough to earn a releatively decent salary and I hasten to add that we also live well within our means. My wife does not work and therefore the mortgage lender would not allow her to be on the title deeds. My flat is worth circa 300k and I have less than 8% left of the mortgage. I would like some advice on the following:

1) I'm thinking of selling this flat and using the money as deposit for a 3-bed house. Would I be able to transfer ownership of the flat once the mortage is paid off in full to my wife's name and that way she could sell it and use the money as deposit towards the house thus enabling her to be on the deeds?

2) If it's not advisable/possible to transfer ownership, what would be the best way to protect my family?

3) I heard on the radio that even though we're simply upsizing, at the time of completion, I would technically have two properties under my name at some point and would therefore have to pay an additional 16k stamp duty which I would be able to claim back. The problem with this is that this purchase will be huge and we simply won't have an additional 16k. Is there a fair and legal solution for this?

4) Would it be possible to remortgage the flat and turn it into a rental property and use the money as deposit towards the house? This way we would keep the flat as an investment. To be honest I'm not sure how this would work given the lack of the extra 16k stamp duty and the fact that my wife does not work but any advice would be appreciated.

Thank you in advance for your help

ThePants999

I think there's been a misunderstanding somewhere. My wife doesn't work, but is still joint owner of our house and on the mortgage. You just make a joint application, but declare her salary as zero. This is obviously pretty commonplace!

And if you complete on selling your flat at the same time as on buying the new property, there's no additional stamp duty to pay. This is the mainline case for most people!

TJ&me

Our mortgage lender wouldn't allow it. They said since she had no income she could not apply for a mortgage. She also had to sign a document stating that she "only lives" in the property and does not own it!.

booksurr

find a different lender then because it is is pretty normal to have a married couple named on a mortgage even if only one of them is the income earner because it is hardly unusual for a married couple to want (and have) joint ownership so both need to on the mortgage.

AnotherJoe

TJ&me wrote: »

Hello all,
I currently have a mortgage on a one-bed flat. My family is growing and my wife and I would like to upsize. I'm fortunate enough to earn a releatively decent salary and I hasten to add that we also live well within our means. My wife does not work and therefore the mortgage lender would not allow her to be on the title deeds.

See a broker as there's something amiss here, that is just plain wrong !

Same as for what you heard on the radio about the extra tax,as long as you are buying and selling in the same transaction (chain) there is no extra SDLT to pay. The fact you've misunderstood this makes me wonder about the "non working wife" issue as well, so i think you need a broker to help you navigate whats what anyway.

glasgowdan

Not to mention if you keep both properties but sell the first within a certain time frame you can claim back that additional stamp duty paid.

Rain_Shadow

Would it make a difference if the OP has used 'wife' as shorthand and they aren't actually married?

AdrianC

TJ&me wrote: »

1) I'm thinking of selling this flat and using the money as deposit for a 3-bed house. Would I be able to transfer ownership of the flat once the mortage is paid off in full to my wife's name and that way she could sell it and use the money as deposit towards the house thus enabling her to be on the deeds?

Whether she owns the flat or not makes no difference to whether your new lender will permit a zero-income joint borrower.

2) If it's not advisable/possible to transfer ownership, what would be the best way to protect my family?

What do you mean?

3) I heard on the radio that even though we're simply upsizing, at the time of completion, I would technically have two properties under my name at some point

You'd be selling the flat at the same time as buying the house, in a chained transaction, using the proceeds of the flat sale to buy the house? Then you've misunderstood the radio programme - you would not pay the 3% SDLT.

4) Would it be possible to remortgage the flat and turn it into a rental property and use the money as deposit towards the house?

Yes.

This way we would keep the flat as an investment. To be honest I'm not sure how this would work given the lack of the extra 16k stamp duty and the fact that my wife does not work but any advice would be appreciated.

You'd only be able to remortgage maximum 75% of the value of the flat, so you'd need to find the other 25% towards the deposit, as well as the SDLT. Then you'd need to have a buffer in place for any rental voids, any maintenance, any repairs when a tenant does a runner after not paying rent right up to the morning of eviction... Do you want the hassle? Is this £300k flat a sensible rental proposition? What's the yield?

bowlhead99

booksurr wrote: »

find a different lender then because it is is pretty normal to have a married couple named on a mortgage even if only one of them is the income earner because it is hardly unusual for a married couple to want (and have) joint ownership so both need to on the mortgage.

The problem that you would traditionally come across with lenders' systems is that lenders looked at single people's mortgages a little differently than joint mortgages.

For example they might say we will lend 4x my salary as a single person or just 2.5x the joint salary if I was in a couple. (not exactly that with every lender, just made up numbers to illustrate the point)

So as a single person with £50k salary I could borrow £200k but as a couple with £90k combined (me £50k and partner £40k) we could only borrow £225k, not £360k. The logic for a lower multiple in a couple being that £360k is a lot of exposure for a household and if one of the couple lost their jobs or voluntarily gave up work to do something else with their time (because there was still £40k or £50k coming in to the household and they decided that was enough to live on) the lender doesn't want them to be on a £360k mortgage with only £40k or £50k of income.

All very well, but then if you run the numbers with me on £50k and partner on £1 and say you want to look at joint income for affordability, the lending amount is £50,001 x 2.5 which is only £125kish, when I could have got £200k if I applied on my own.

So that might encourage me to apply on my own, and if I am the only person applying for the mortgage the lender will not want another person in the background as an owner on the house - if they are putting a charge on the property the paperwork needs to involve all the owners.

So, if the lender is an idiot and has an inflexible system, they might not allow the two of you to get a joint mortgage of the size you want with this zero income person as a dependent in the background, knowing the payments would be funded from your salary, even if they will lend to you as an individual knowing there is a zero income person in the background and that all the payments would be funded from your salary.

The solution as suggested by others above is to go see other lenders, or see a mortgage broker who knows the rules at lots of different lenders, and find a better deal.

If you have a £300k house which has 90%+ equity, then once you have sold it you are going to end up with £270k of cash to buy something else with. As your assets are pretty much considered joint as a married couple there is absolutely no tax or other restriction on you gifting £135k or the full £270k to your wife for her to buy a real and tangible share of the equity of the new house.

You just need to find a lender that accepts that the wife who is jointly liable for the whole mortgage debt is not going to be very good at servicing the mortgage if you die or lose your job, because she has no income. It is not an insurmountable problem, because if they lent to you on your own and you died or lost your job, there would not be anyone else to service the mortgage for you anyway. So a lot of lenders will come around to the idea.

It may simply be a misunderstanding on the part of the specific customer service team member or manager at your current lender, but if you threaten to jump ship and use another lender, it is their loss if they wave goodbye and you turn out to be a great low risk customer for someone else.

TJ&me

Thank you all for your great advice.

@AnotherJoe, It's entirely possible that I misunderstood something with regards to my non-working wife. However, having read @bowlhead99's reply, I wonder if the mortgage lender was basing their response on the multiplier for a joint application etc at the time. To be completely honest I don't remember the exact details other than they would not do it and she had to sign a piece of paper to state that. At least I now know that it is entirely possible and will look to do that for our house.

@AdrianC, with regards to question number 2, I was wondering if there is another better way of protecting my wife if I couldn't transfer ownership of the flat to her so that she could then sell it and contribute towards the house. Just asking for ideas and suggestions as to what would be the best way to provide for my wife and kid if something were to happen to me.
As regards the investment opportunity, it's a shame but we wouldn't be able to afford an additional 25% plus buffer money not to mention the SDLT which we can't afford on a temporary basis let alone permanently :-)

Lots of food for thought guys. It's a big relief to know that I wouldn't have to pay the SDLT if I'm selling in a chain as that would have put a spanner in the works. I appreciate that one needs some money to do the place up but we would rather move in semi-broke and put up with the pain of not being able to do the house up until much later than remaining in a small flat.

AdrianC

TJ&me wrote: »

@AdrianC, with regards to question number 2, I was wondering if there is another better way of protecting my wife if I couldn't transfer ownership of the flat to her so that she could then sell it and contribute towards the house. Just asking for ideas and suggestions as to what would be the best way to provide for my wife and kid if something were to happen to me.

Protecting her from what? The only time she wouldn't inherit your entire estate in the event of your death would be if you had a will that explicitly left it to somebody else. If you get divorced, then your entire joint assets are taken into consideration.