How to find £22k...?

Jamer

Hi there guys. I'm new to this forum, although I've been following it for some time now - I'm afraid to say that I need some help on a pretty technical problem (that's what I think anyway!)

I live with my missus in her house (mortgage of £100k, house is worth about £170k). We're getting married in 12 months when things will get officially divided in two. I have £30k savings in a deposit acc at United Trust, part of which was due to be used as an invetsment into the house (possibly coinciding with a house move).

We both earn £30k each and, I thought, were relatively debt-free. In the spirit of openness (as a soon to be married couple) she's just broken down and told me about £22k of credit card debt that she's got.

The good news is that at one point it was £27k. She's done all the right things so far, but the debt is just sitting equally across fairly low rate cards.

I guess the most sensible thing would be to use my cash to get shot of the debt. The problem there is that the interest rate at United Trust is actually higher than what she's paying on the cards. My immediate thought was to go and see HSBC bank manager and get them to advance on the (HSBC)mortgage to the tune of £22k. OK, that handbag she bought for £20 four years ago is going to take another 21 years to pay for - but this is a debt we just don't need as we start our life together.

I really am stumped on which is the best way forward. Any thoughts?

Thanks, Jamer

Nicky_3

This is really a decision for you both to make together. It would seem that you do have a facility to clear the debt, and I see you are probably looking for the best way to do it.

You talk about not wanting to pay cash because of the interest rates, but if you put it on a mortgage, surely you would be paying more interest than clearing the debt with cash?

I think the most important thing is that you are starting your life together with no secrets, it may have taken a while for her to pluck up the courage to let you know about the debt, but at least she got there in the end, and good for you that you are willing to help her rather than judge her, its a good start for you both.

As I said, its a difficult thing to say "Oh, do it this way" as basically, its just a matter of you deciding which way you do it yourselves. At least if you do put it on the mortgage, she will feel she is still in a sense paying for her debts.

Sorry I couldn't be more definate. All the best to you both.

Jamer

I really appreciate that. Thank you. You are right, of course. By putting the debt on the mortgage we'd be paying more interest. Hmm.

Ember999

I see a simple solution to your problem

1) Pay off all her outstanding debts with the cash you have in the savings account. This leaves you both debt free to start your new life together as a married couple. But this leaves you with an issue :- your savings are all gone and you have no security for you! which comes to point no 2.

2) Ask her to put you on the house deeds and mortgage. This way you have security for your investment of paying off her debts and you both jointly own the house and all the equity in it.
Will cost you around £600 at a Solicitor to get it done properly!

I see this as a fantastic solution as

a) her debts are all cleared.
b) you can well afford to pay the solicitor to transfer title deeds into joint names and joint mortgage.
c) You own everything jointly as all married couples should do.
d) Your savings are not gone , your money in theory is now invested in your joint home!

Result: No debts, own home jointly, happy little family


ps....Do not add it to the mortgage....you will increase the interest it costs you and lengthen the life of your mortgage and the payments. The idea is to pay your mortgage off as quickly as possible so that you own your house not the bank!

YorkshireBoy

Ember999...

Is stamp duty payable?

Ember999

If you transfer into joint ownership? No, no stamp duty payable.....I know as I have done this myself...it cost £600. End of Story.

James240

i agree with Ember on this, sounds like the most easiest solution Jamer and it will give u a nice joint start into your married life. :j

Debt_Free_Chick

You will probably have to remortgage too and put that into joint names. The reason being that once you are added to the deeds, then HER mortgage (of £100k) is only secured against HALF the property (value £85k). Her mortgage company will almost certainly not accept this. So you will need to take on half the mortgage in order to get half the house value.

Fine, if this is what you were already planning, but you'll end up having forked out £22k and owing £50k - though you'll have a half share in a house, which would theoretically give you back £85k

Ember999

Debt_Free_Chick wrote:

You will probably have to remortgage too and put that into joint names. The reason being that once you are added to the deeds, then HER mortgage (of £100k) is only secured against HALF the property (value £85k). Her mortgage company will almost certainly not accept this. So you will need to take on half the mortgage in order to get half the house value.

Fine, if this is what you were already planning, but you'll end up having forked out £22k and owing £50k - though you'll have a half share in a house, which would theoretically give you back £85k

Yes, he will need to go on the mortgage, they don't actually re-mortage when you add a partner to the mortgage (done it myself, so I do know) what they do is a 'deed of variation' to add the new person to the house deeds and re-do the mortgage in joint names. They do the usual searches and legal process as with a new mortage, but it is quite simple to do and costs around £600.

Yes, he will have used his £22,000 to take on a mortgage of £50,000 but he will have gained equity share in the £70,000 equity currently sat in the property.

Also, isn't it as it should be as a married man to owe equally on the mortage? Everything should be joint. Savings, money owed on mortage etc. A marriage is doomed to failure if before they are even married, both parties are deciding who owes what or who owns whatever etc. If you are married for life (else why bother getting married in first place!) you should own everything jointly.

By following my suggestion, they both are debt free, both own their home and both own the equity in it.

Debt_Free_Chick

Ember999 wrote:

Also, isn't it as it should be as a married man to owe equally on the mortage? Everything should be joint. Savings, money owed on mortage etc.

Certainly many would agree, but Jamer and his intended need to decide for themselves.

A marriage is doomed to failure if before they are even married, both parties are deciding who owes what or who owns whatever etc. If you are married for life (else why bother getting married in first place!) you should own everything jointly.

I wouldn't go as far to say it's doomed to failure - but certainly, these things should be worked out up front. If it is a case of sharing everything, then yes, just consider everything to be jointly owned, 50:50. Otherwise, put a pre-nup in place. Much easier to have these things straight at outset. You never know where the future takes us

By following my suggestion, they both are debt free, both own their home and both own the equity in it.

Or to put it another way - he "loses" £22k but gains a share of the equity, both at current and future values.

She gets to be debt-free but "loses" half the equity.

They both have to be happy with both sides of the equation - we might be happy, but they have to be

headchef

To have my name added to the deeds and the mortgage it cost £260 not £600!! £100 was a fee I had to pay to the mortgage company, about £50 to have the deeds sent to the solicitor and the rest was for the solicitor to do the paperwork. I wasn't able to barter with the mortgage company but I did shop around for a reasonably priced solicitor.