Removing Person from Mortgage

claaire3

Hi,
I split from my ex-partner last year and we have a joint mortgage together. There is around £110,000 left on the mortgage with around 23 years left, and I have applied to have my ex partner removed as I have no problem with paying the payments myself.
I have a salary of around £26,500 and zero other debts to my name so didn't think this would be a problem but the mortgage company (Virgin Money) are saying it's only 'affordable' if i extend the term to the maximum of 39years and pay an overpayment of almost £13,000. I'm not overly surprised they want to make it slightly more affordable however it seems like a lot of money - has anything similar happened to anyone and anyway to get round it? I've asked to appeal it (or at least reduce the overpayment) but they are being stubborn - doesn't help that their customer service is terrible and no one on the phone seems to know anything!
Thanks

Brie

when you say "an overpayment of almost £13,000" do you mean that adding 16 years to the term means that the extra you will pay over the life of the mortgage?  While not ideal I know a lot of people would jump at that if it means that they could get on with their life without it being entangled with someone they want to leave behind.  

What are the other terms of the mortgage?  Can you overpay up to 10% a year or similar?  If you are confident that you could make the payments for the 23 year life and the new payments are going to be lower why not accept that and then save the difference and every year (or each month perhaps) pay a bit extra.  That will reduce the principle thereby lessening the interest to be paid and effectively reduce that £13k extra they anticipate they will get.  

Or have I missed something??

claaire3

Hi, thanks for your reply - no, they want a £13,000 upfront overpayment before proceeding as they say the maximum I can borrow is £97,000 - I don't understand this as I thought generally you can borrow over 4x your salary. So even though my monthly payments will reduce by over £100pm, the term is extending by a lot which I assume means the overall interest will go up too. And also means I have to part with basically all of the savings I currently have.
But yes, I understand your point about making overpayments up to 10% a year.

ACG

Its not that they are being stubborn, they have an affordability calculator. You either fit it or you do not.
You can not negotiate with them. Regulation is good in many ways but it takes a lot of flexibility away. 

How long are you tied in to your current deal for?
You will probably find you can get more if you tie in to a 5 year deal, but I dont think you can do that until you are within 6 months of your current deal finishing. 
You may need to switch lenders if you cant make it work with Virgin. 

claaire3

I do understand that, I just don't understand how they think I can't afford to pay my monthly payments but I can afford a lump sum of £13,000 - I suppose it's just the way it works but it does seem silly! Especially as their online calculator says someone on my salary with no debits would be able to borrow around £110,000!
Unfortunately I still have another 3 years on my fixed rate but it's a good rate I'm on so it would also be silly of me to move to a different lender right now.

Brie

Do you have the £13k?  Is there a friendly family member who would front it for you if you don't have the cash?  (if so you might want to refer to it as a gift if asked about it by the bank)

Your salary is just a gnat's whisker short on the 4x for eligibility.  If you have a way to get the £13k in your back pocket but speak to a manager rather than just an agent about the overpayment and could present a proposal of £7k instead so that you are at the 4x mark maybe that would swing it?  

Banks can be such &^&%$&^%$ at times.  

Brie - 40 years in finance.....

MWT

claaire3 said:

I do understand that, I just don't understand how they think I can't afford to pay my monthly payments but I can afford a lump sum of £13,000...

They are not assuming you can afford a lump sum of £13,000 they are just telling you that the only way they will lend to you in your name only is if the outstanding amount is £13,000 lower, your ability to do that is not a factor in what they are proposing.

ACG

claaire3 said:

I do understand that, I just don't understand how they think I can't afford to pay my monthly payments but I can afford a lump sum of £13,000 - I suppose it's just the way it works but it does seem silly! Especially as their online calculator says someone on my salary with no debits would be able to borrow around £110,000!
Unfortunately I still have another 3 years on my fixed rate but it's a good rate I'm on so it would also be silly of me to move to a different lender right now.

Is the £110k based on a 5 year fixed rate? 

They are stress testing you on the variable rate rather the rate you are paying now. If you took out a mortgage 3 years ago you are probably paying 2.x% where are now it would be closer to double that and the stress testing rate higher still. 

The £13k does not have to come from you, it could be a gift. They are not saying you can afford a £13k lump sum, they are just telling you what they can do. That is all they can do. 

Sorry, I am reading my posts back and I sound like I am being a bit of a (use any word you like here). Its not supposed to. I can imagine its frustrating. But its not Virgin being awkward, it would be the same for all leners pretty much. 

Funnily enough, I had something similar with Skipton building society for a customer a couple of years ago and they have a rule that says if you can show you have paid the mortgage on your own for 6 months they can have some flexibility on affordability. The lady I did it for was not passing affordability as they were only using some of her benefit income, but had they used all of her benefit income it would have passed. They bent their own rules, but as far as I am aware they are the only lender with that flexibility. 

claaire3

Brie said:

Do you have the £13k?  Is there a friendly family member who would front it for you if you don't have the cash?  (if so you might want to refer to it as a gift if asked about it by the bank)

Your salary is just a gnat's whisker short on the 4x for eligibility.  If you have a way to get the £13k in your back pocket but speak to a manager rather than just an agent about the overpayment and could present a proposal of £7k instead so that you are at the 4x mark maybe that would swing it?  

Banks can be such &^&%$&^%$ at times.  

Brie - 40 years in finance.....

Yes luckily I have a trust fund that my dad set up when I was younger so I should just have enough - I've already proved to them I have the money but no budging to a lower amount they say - I would find this all a lot easier to process if they talked it through properly on the phone, but their phone operators just repeat the same things to you with no context.
It's just a shame that all my savings would then be gone and nothing to fall back on but that's life I guess!!

BikingBud

Wow fixing for life of mortgage £97k @5.65% would cost you £59k more in interest over 39 years (468 months @ £513) vice 25 years (300 months @£604).

Other figures and fix terms might work but also cause issues and tie in ERCs but affordability in whose favour?

And we wonder why people will have no money into retirement! 

Please explain again why it is a good idea having house prices at so many times income

Brie

claaire3 said:

Yes luckily I have a trust fund that my dad set up when I was younger so I should just have enough - I've already proved to them I have the money but no budging to a lower amount they say - I would find this all a lot easier to process if they talked it through properly on the phone, but their phone operators just repeat the same things to you with no context.

It's just a shame that all my savings would then be gone and nothing to fall back on but that's life I guess!!

Well the savings won't actually have gone, they'll just be elsewhere.  Sitting in your house saving your %% every day which is great. Sounds like a good use of the fund dad set up in my opinion.