Partner Contributing to Mortgage

ShowMeTheDough

Hi all, 

Hoping to get some thoughts on my situation.

I have a mortgage on my property and have thus far paid off a significant amount of it.

My long term girlfriend and I have been discussing her moving in permanently and contributing towards to the mortgage. We want to be sensible about the situation and have discussed getting a legal document signed which states in the event that we part ways, she would be liable only to what she had contributed.

From what I understand, getting her officially added to the mortgage would require fully unwriting again, which is not an option for me with my current employment situation. Providing things are still going well come the next renewal (and my employment status is more robust) , we would look at doing this. 

In the meantime, would obtaining a legal document as described above be a simple process?

Obviously we will ultimately approach a solicitor, but first I would be keen to know if anyone here may be able to shed some light as to what to expect. 

Thanks in advance for any input. 

CSL0183

No, this is a minefield if she is not on the mortgage or the deeds of the property,  She would have no say in your property on separation. 

I’m not even sure where you would start on the matter and the only reasonable way to manage this would be to add her to the mortgage and to the deeds with a minute of agreement type document that protects your current level of equity. 

If your mortgage is say £1,000pm and you both pay £500pm towards it and then split up after 2yrs, she wouldn’t be due back her £12,000 as each monthly payment has interest applied and that is dependent on many aspects, interest rates, mortgage term, property market dips or rises. 

Can’t see this being easy. 

getmore4less

You can do deed of trust that sets out the beneficial interest based on current values and the share of the debt being serviced. 

If you separate you can work out the beneficial interest less the share of the debt. 

This does not need to be on the mortgage or deeds but create a future debt to the OH based on the value and outstanding debt. 

Another popular option is don't have the OH contribute anything they set up savings account for the equivalent, to buy in later. 

It is very easy to work out the numbers the hard bit is having the resources at split time and deciding what triggers the payout.

The way it works is by paying part of the mortgage they buy that share of the house. Eg £100k house £60k mortgage pay 50:50 then they buy 30% with a £30k debt. 

Split up : value of house is £120k their 30% is now £36k but they still owe 50% of the outstanding mortgage. If that has gone down to £50k you could need to find £11k to buy them out. 

CSL0183

getmore4less said:

You can do deed of trust that sets out the beneficial interest based on current values and the share of the debt being serviced. 

If you separate you can work out the beneficial interest less the share of the debt. 

This does not need to be on the mortgage or deeds but create a future debt to the OH based on the value and outstanding debt. 

Another popular option is don't have the OH contribute anything they set up savings account for the equivalent, to buy in later. 

It is very easy to work out the numbers the hard bit is having the resources at split time and deciding what triggers the payout.

The way it works is by paying part of the mortgage they buy that share of the house. Eg £100k house £60k mortgage pay 50:50 then they buy 30% with a £30k debt. 

Split up : value of house is £120k their 30% is now £36k but they still owe 50% of the outstanding mortgage. If that has gone down to £50k you could need to find £11k to buy them out. 

That plan would need to be registered with the land registry though. The house would need a current valuation and the equity share needs to be known. In the event of the current owner dying, who has ownership of the house? Who takes on the mortgage? It’s a lot more complicated than you make out. Without being on the deeds or indeed the mortgage the partner has no say in the property, you would need both mortgage approval and solicitor would need to register that agreement against the deeds. 

£100k house, £60k mortgage, means £40k (or 40%) will always be the owners. The remaining £60K split in a 50/50 way would then give a 30% share to the partner if the mortgage is paid off and the house is still valued at £100k. If the mortgage is paid off and the house is now worth £150K, the owner still has his 40% (£60k share) and the pair then entitled to £45k each of the remainder. For it to ever get to 50/50 then the partner would have to buy out separately or put a cash injected into the mortgage. 

Best seek legal and mortgage advice but it’s certainly not as easy as doing a quick deed of trust / minute of agreement as as above, what happens in the event of death or separation, it could get messy so mortgage company needs to know and approve. 

ShowMeTheDough

Thanks for the comments, folks. 

Seems far more complex than I thought it would be! 

Does it makes things any less complicated if my OH was only interested in getting her contributions back should we split - i.e. no uplift/reduction in line with the property value, or adjustments for interest rates etc? If she'd paid say £10k in in 2 years and we decided to part ways, if she's happy with getting just the £10k back - is that workable? If all payments are recorded, and I have signed something to confirm I would be reimbursing her in full should we split (or in the case of death, she would receive it from my estate) could this be an option? 

Sorry if I'm going over old ground of what's already been discussed - I guess I just didn't realise this would be so complicated! 

Thrugelmir

Your partner could "lend" you money in a fully documented manner. With attached conditions as to when this would be repaid. 

CSL0183

ShowMeTheDough said:

Thanks for the comments, folks. 

Seems far more complex than I thought it would be! 

Does it makes things any less complicated if my OH was only interested in getting her contributions back should we split - i.e. no uplift/reduction in line with the property value, or adjustments for interest rates etc? If she'd paid say £10k in in 2 years and we decided to part ways, if she's happy with getting just the £10k back - is that workable? If all payments are recorded, and I have signed something to confirm I would be reimbursing her in full should we split (or in the case of death, she would receive it from my estate) could this be an option? 

Sorry if I'm going over old ground of what's already been discussed - I guess I just didn't realise this would be so complicated! 

Unwise, you could potentially break up 10yrs down the line and she gets back everything that she’s ever put in (Effectively living rent free for those 10yrs)   

Remember, your mortgage payment is not all capital, for arguments sake, let’s just say your mortgage payment is £1000pm and you both contribute £500pm, depending on your rate and term left, only £6-700 of that £1000 is paying down the mortgage, the remainder is paying the lenders interest. Why should your partner get back her £500 x 12 months x 10yrs back when only £300 of her contribution was paying down the balance? How do you work this out? 

But yeah I would stay away from the full reimbursement idea otherwise all you are is a savings account, if she gets unhappy 5yrs/10yrs/15yrs down the line she gets all her money back having lived rent free for all that time?

Best bet would be...
- House valuation to ascertain current level of equity. This will then be protected in a deed of trust, either by % or by a nominal value. A nominal value sees no drop (crash) or increase through growth (boom) but a % could see you with more or less depending on whether your house falls or drops.

You would then lodge that with a solicitor who will add that protection to the title deeds (Mr x owns 40% of the property) The remaining 60% from this date forward is 50/50. For that, your partners name would need to be added to the deeds. You would need to speak to your lender to see if she would also need to be added to the mortgage. You have to think along the lines of what would happen if I was struck down dead tomorrow, where would the house end up? With the deed of trust as above, your 40% and then your 30% would be safe and your kids, mother, whoever you have your will set too would then have that 70% of the house. 

Best to speak to a solicitor who deals with these things (and your lender)

A sensible time would be at your next remortgage point. Add your partner to the mortgage, your lender would appoint one of their own solicitors to do the deeds work to protect your share upto that point, it isn’t all that expensive to do. A few hundred £

CSL0183

Btw, I have literally just been through this with a new house purchase with my partner. I put in £75k deposit, my partner £0. That £75k is registered against the deeds incase of separation, essentially I get that back before any further equity is split 50/50. We pay the mortgage payment 50/50. 

ShowMeTheDough

CSL0183 said:

Btw, I have literally just been through this with a new house purchase with my partner. I put in £75k deposit, my partner £0. That £75k is registered against the deeds incase of separation, essentially I get that back before any further equity is split 50/50. We pay the mortgage payment 50/50. 

Some very helpful information here - greatly appreciated, thank you. 

I think registering my current equity/total payments to date against the deeds, then looking to add my partner to the mortgage would be the best/most straightforward solution.

One further query with regards to your comment on my next remortgage point: as it happens, my current fix ends in circa 4 months. I am currently out of work and so remortgaging with another lender is not a possibility - I will therefore be selecting the best offer that my current lender will give me. Would it be possible to add my partner to the mortgage/product switch at this stage, or (as I suspect) would a new mortgage effectively need to be underwritten, with affordability checks for both of us? If its the latter, obviously we cannot do this right now. 

CSL0183

ShowMeTheDough said:

CSL0183 said:

Btw, I have literally just been through this with a new house purchase with my partner. I put in £75k deposit, my partner £0. That £75k is registered against the deeds incase of separation, essentially I get that back before any further equity is split 50/50. We pay the mortgage payment 50/50. 

Some very helpful information here - greatly appreciated, thank you. 

I think registering my current equity/total payments to date against the deeds, then looking to add my partner to the mortgage would be the best/most straightforward solution.

One further query with regards to your comment on my next remortgage point: as it happens, my current fix ends in circa 4 months. I am currently out of work and so remortgaging with another lender is not a possibility - I will therefore be selecting the best offer that my current lender will give me. Would it be possible to add my partner to the mortgage/product switch at this stage, or (as I suspect) would a new mortgage effectively need to be underwritten, with affordability checks for both of us? If its the latter, obviously we cannot do this right now. 

My suspicion would be a new joint application with the underwriters but could be be wrong. You could always call and enquire with your lender, their onsite advisors are generally pretty good and can give you advice over the phone. You could just drop onto the SVR and apply together when you are in a position too. Weigh up the pros and cons, if you’re only going to be on an SVR for a few months then let it lapse and pay the slight increase and when you’re in that position, a new mortgage application, even with another lender and then you both start off from scratch (just that you have your existing equity protected in the deeds) 

ShowMeTheDough

CSL0183 said:

ShowMeTheDough said:

CSL0183 said:

Btw, I have literally just been through this with a new house purchase with my partner. I put in £75k deposit, my partner £0. That £75k is registered against the deeds incase of separation, essentially I get that back before any further equity is split 50/50. We pay the mortgage payment 50/50. 

Some very helpful information here - greatly appreciated, thank you. 

I think registering my current equity/total payments to date against the deeds, then looking to add my partner to the mortgage would be the best/most straightforward solution.

One further query with regards to your comment on my next remortgage point: as it happens, my current fix ends in circa 4 months. I am currently out of work and so remortgaging with another lender is not a possibility - I will therefore be selecting the best offer that my current lender will give me. Would it be possible to add my partner to the mortgage/product switch at this stage, or (as I suspect) would a new mortgage effectively need to be underwritten, with affordability checks for both of us? If its the latter, obviously we cannot do this right now. 

My suspicion would be a new joint application with the underwriters but could be be wrong. You could always call and enquire with your lender, their onsite advisors are generally pretty good and can give you advice over the phone. You could just drop onto the SVR and apply together when you are in a position too. Weigh up the pros and cons, if you’re only going to be on an SVR for a few months then let it lapse and pay the slight increase and when you’re in that position, a new mortgage application, even with another lender and then you both start off from scratch (just that you have your existing equity protected in the deeds) 

I'll contact my broker on Monday and see what they say.

I'm a little hesitant to drop onto the SVR as the balance is still pretty high (circa 230k) and realistically, it would be many months (at least) before we are both in a position to apply for a mortgage. The extra interest accrued over that time compared to a fixed deal would be considerable. 

Thrugelmir's suggestion of my partner 'lending' me money in the form of documented monthly payments that are subject to clear repayment terms could be an option. If adding her at the approaching renewal stage isn't possible, we may look at this instead.