Separation - mortgage solutions / avoiding the ERC

Corsair82

First of all thanks to anyone who reads this and can offer any advice.

The situation is this. My partner and I purchased a house together with a fixed rate 5 year mortgage, but after 2.5 years we have separated. We have provisionally agreed for me to buy her out of the house at an agreed sum. I can afford her buyout sum and I can afford to manage the mortgage on my own. I have checked with a broker and I could also afford to take out a new (hypothetical) mortgage in my sole name that would cover the remaining capital sum. This would even be with the same bank, so affordability is not an issue (essentially my income has increased quite a bit since we took out the original mortgage).

The issue is the mortgage Early Repayment Charge (ERC). It's massive and would massively dent our savings and also potentially scupper my buyout of her (because she'd have to pay her share of the ERC out of the money I pay her). It would be nearly 3 years until the fixed rate ends. It is hugely in both mine and my ex-partner's interest to do everything we can to avoid the ERC.

I'm looking for a solution that allows both me to buy my partner out and also for us to avoid the ERC. I'd welcome any new suggestions I haven't thought of but what I've come up with are the following:

1) SOLUTION: Ask the Bank to transfer the mortgage from our joint names into my sole name and waive the ERC.
QUESTION: Is this at all likely to happen and does anyone have any experience/hearsay about this occurring? My income is much higher now but still less than our joint income when we took the loan out. I also appreciate the principle of two lenders being safer to chase than one. However does the bank have any interest in being reasonable and trying to enable us to find a solution, bearing in mind that according to the broker's calculations by income is enough to raise a new mortgage with this bank anyway?

2) SOLUTION: Ask the bank to replace my partner on the mortgage with a parent and waive the ERC.
QUESTION: Same as above really - is this likely to happen and has anyone heard of it happening? This solution isn't ideal as my parents are retired and there are plenty of years left on the term of the mortgage. They do have substantial private assets in lieu of an income . Presumably once the 3 years are over and the fixed rate has finished I could take out a new mortgage with a new lender and take them off the mortgage?

3) SOLUTION: This one's a bit inventive (I guess). If we both stay on the mortgage and change nothing then we can wait for the ERC charge to end. Obviously the issue is we would have to both pay the mortgage during that time (while 1 of us rents) and wait to agree the buyout for 3 years (at which points our minds could change on what a fair buyout is, not ideal and a lot of stress). But what if we could sign a contract together whereby we agree the following:
a) I agree to purchase her share in the property at the agreed sum but only once the fixed mortgage rate ends (and the ERC falls away). There could be a substantial advance payment to tide her over, with the remainder held in a solicitor's account for peace of mind;
b) I undertake to wholly pay the monthly mortgage repayments until the fixed term is over. So she has no obligation to pay the mortgage. I could take insurance out and/or indemnify her, so she has peace of mind if I theoretically stopped paying; and
c) she undertakes to sign the property deed transfer into my sole name once the fixed term is over.

the solution is that we agree the property buyout amount now (and don't have it hanging over us), that she isn't liable for the mortgage at all, and we both avoid a massive ERC charge. The negative is that she still won't be able to take out a new mortgage in that time either, but due to circumstances that is very unlikely to happen. She also has to wait for the full buyout money, but that's the cost of avoiding the massive ERC (and also ensuring the transfer gets signed 3 years later).

So long post for which I apoligse but I wanted to be as clear as possible before asking for advice. Has anyone got any advice or experience of any of the possible solutions here?

(Finally I accept that "call your bank" and "call a solicitor" are valid suggestions, but I'm trying to get some additional information before I cross that bridge).

Thanks a lot.

BoGoF

Bottom line is to go on your name only (or add anyone else) is likely to mean a full new application and probably trigger the ERC. And probably best to avoid adding a parent - you haven't taken into account possible 2nd property SDLT.

In all honesty the only people who can give you an answer is the lender. In theory the ERC will kick in if you remortgage. However there has been anecdotal evidence that ,on occasion, the lender may waive it.

Corsair82

Thanks BoGoF. Two questions from me:

1) Anecdotally, have you heard of an ERC being waived (or reduced) in circumstances similar to either of my first two solutions?

EDIT: Also, is there a risk that just having this conversation with the Lender may scupper my potential third solution because I've tipped the lender off that we are separating?

2) Do you have any comment on my potential third solution?

Thanks.

silvercar

Your third solution isn't that rare. There are variants of it, where she gets a set percentage of the property value based on the amount she should be getting now. That way she benefits by any property value increase as compensation for having to wait 3 years before she can buy again (and risks any decrease).

AnotherJoe

Ask them regards 1.
Re 3 I think it's too complex and I am certain that you cannot release your ex from her obligation to the mortgage co, however its phrased. You can of course informally do something, you can draw up an agreement that covers who pays the mortgage , who gets what and so forth. This may turn out to be your best option if 1 doesn't work.