transfer of equity and remortgage

birdsong66

I'm told by the Halifax that to remove my ex-partner from the mortgage (we haven't been together for 14 years but continued to pay as it was the family home) will require me to re-mortgage. There are only 4 years left and my husband and I wanted to buy him out, remove his name and put it in our joint names. But I don't want to sign up for another mortgage when so little of this one is left (it's an endowment mortgage). Is it impossible to have a transfer of equity while there's a still a mortgage on the property? I'm happy to give the ex his share, he signs it over and we both just stay on the mortgage for 4 more years, but at the end he is not on the deeds. Is this possible? Can't understand why his name can't just come off, it comes out of my bank account anyway so I'm obviously able to pay it. Urgghhhhhhhh!!!!!

princeofpounds

Yes - a transfer of equity changes the owners of the property. The mortgage debt is borne by the current owners of the property. The bank is not going to agree that their security - the house - be transferred to someone who is not a debtor to them. Changing the names on the mortgage, which would enable this, is a remortgage. That's why they are asking you to do it. 

Let's think about it with a simplistic analogy. You agree your friend Sharon and her husband Bob can rent your car. They sign an agreement stating that they will reimburse you if the car gets damaged whilst they are driving. Then Sharon dumps Bob and shacks up with Steve, who you've never met before. Would you be happy if Steve was driving the car around? No.

Why are you so averse to remortgaging? Yes, there can be a fee involved but apart from that and a bit of paperwork there is nothing in particular to worry about - it's not like you need to sign up to a fresh 25 years or anything! Do you lose anything in particular from the endowment mortgage if you terminate it 'early'?

GDB2222

Your ex won’t want to be liable for the mortgage, even just on paper, without owning the house. The lenders will be unhappy too, so it just won’t happen.

Is there much involved in remortgaging if you stay with the same lenders? Presumably, there’s a fee, but this is going to cost you for legal and stamp duty anyway. You’re liable for stamp duty on his half of the equity that you’re buying PLUS his half of the mortgage that you’re taking over. 

He’ll need to assign his half of the endowment to you, too. How will you value that? Half the surrender value? That could have tax implications, although perhaps nobody will notice.  

You really need to get proper advice on this, not on a forum.

birdsong66

Yes, I know. Thanks for the replies. I assumed that a new mortgage would involve more than 4 years and also it may need to be a repayment mortgage as apparently the rules are stricter these days on interest-only. Need to find a solicitor - how do we do that at the moment? Do we pay for advice over the 'phone?

steampowered

There's no harm in remortgaging. Given that interest rates are at historic lows right now - you may find remortgaging will get you a cheaper rate than you are paying at the moment, saving you money.

It is possible to:
- Remortgage with a short term such as 4 years.
- Remortgage with a longer term on it, but simply pay off the remaining balance to clear the mortgage when you are ready to do so. You can pay off a mortgage at any time so long as you not still within a fixed interest rate.
- Pay off the mortgage completely, and take out a personal loan to cover the balance. The interest rates on personal loans tend to be higher. However, you won't have to pay as much in lender fees or valuation costs or legal fees. If the amount outstanding on the mortgage is small you could be better off taking a personal loan rather than a remortgage.

HOWEVER - remember that you have an endowment mortgage, so you still owe the capital - your mortgage has been on an interest-only basis. How does your endowment operate - will you be able to cash in your endowment early? Will your endowment be sufficient to pay off the capital on the mortgage when it is cashed in? It is really important to check this as you will have deeper problems if the endowment is not adequate!