Can I come off a mortgage?

HelpWhereIcan

AuntyJean wrote:

When I took on the H2 mortgage my broker told me the maximum amount I could borrow was only around £110K and that the £30K joint mortgage would be taken into consideration as a whole. Hence the reason why I do not think I can get any more.

Not sure why this would be. How much are you paying towards the mortgage on H2 and what rent are you receiving?

Normally, the only situation in which a buy to let would not be ignored is if the payments on the mortgage are higher than the rent received, or are you tied into your current lender on H1? If so, who is it.

What income do you have?

Do you have any loans etc that you are paying on a monthly basis?

AuntyJean wrote:

As H2 is on a buy to let the interest is slightly higher.

As long as it is on the most appropriate deal for you, this is not surprising.

PS is your adviser a mortgage broker or an IFA - there is a difference, including an obvious one in areas of knowledge/expertise.

HelpWhereIcan

AuntyJean wrote:

have been putting £155 pm into an ISA since that time (managed fund I think - my broker arranged it). So I have only been paying the interest on the two mortgages.

Are you prepared to accept the risk that the mortgage will not be repaid if the underlying investment (managed fund?) does not perform well enough to build up a lump sum that is enough to repay it?

If not, then you may be better redirecting this money towards reducing the balance of your mortgage if your current deal allows overpayments.

Sharpie

Hi Aunty Jean,

I agree with HelpWhereICan...

There are some lenders who don't take into account the rental income, and others that do..(i.e Some expect you to be able to pay both mortgages with no rent and some don't). Maybe you need a review of your mortgage situation, and look for a lender who will take house 2 out of the equation because it is let.

Also, are you actually divorced (I think you might be?)? Its just that sometimes you have to pay stamp duty on transfer of equity on houses, but there is an exemption if you are going through the divorce process. You may need to check this out too.

I think you need to see a solicitor, and maybe get a second opinion from a specialist mortgage broker. Any decent one should give you a first meeting free of charge, but you need to go prepared.

Hope this helps!

AuntyJean

H2 - BTL mortgage at £80K interest only for 15 years at a fixed rate of 4.9% for 3 years then 6.44% for remainder (variable). Payments (interest only) are £319.33pm and the income from the tenant is £595pm. Obviously there is tax and annual gas safety check etc to come out of the income. The mortgage is with Standard Life. There are early repayment charges if made within the first 3 years - 6mths interest yr 1, 5mths interest yr2 and 4mths yr 3. This mortgage has been going since Jan 06 and is taken in arrears. The actual mortgage commenced Oct 05. Have not had first statement yet. Also there is an early redemption fee of £185.

H1 is an interest only mortgage with Alliance & Leicester over 12 years. Completion was 8th March 2005 and at 4.8% variable for 24 months with an early redemption charge within that period, which was £900.86 (as at Jan 06). The interest then goes up to 6.84% with a Redemption Admin Charge of £295.

I am also paying £37.73pm into a Decreasing Term Assurance with Critical Illness cover. There is no cash-in value and this is in joint names. Is it worth continuing with this? It has been going since September 2001 and the initial value was £35,000.

No other financial commitments.

Yes I am divorced. The buyout of H2 was part of the divorce settlement.

My mortgage broker is an IFA but he specialises in mortgages. His partners deal with the other side of investments, insurance etc.

Sharpie

Hi Aunty Jean,

What is your salary?

Both mortgages are on very good rates, particularly the Buy to Let.., and I would see no reason to disrupt that one at all, because it is "washing its own face" so to speak. Standard Life are a very good and flexible lender..it may well be worth talking to them about a new mortgage (to replace A&L) in March 2007.

The Alliance and Leicester Mortgage is due for renewal in March 2007, so you need to start to thing about reviewing that in Jan 2007 so you have no major increase in mortgage payments..and you can attempt to sort this out for once and for all..

Lenders have become less strict about waht they lend (certainly since you last looked at the situation 18 months ago) and you may find that the rules have relaxed with some lenders in your favour. You may find now that you may be able to raise capital to buy him out when it wasn't possible 2 years ago..

The Decreasing Term Assurance will be of some value to you if ...

a/ you are diagnosed with a critical illness
b/ your ex partner dies,

If you die, he will get the benefit..(because it is a joint life policy).
Is this what you want?

Also, the policy is on a dcreasing basis, and neither of your mortgages are. So the life assurance and critical illness cover is decreasing, when your mortgages aren't.

If you are effectively single now (with no kids), you could look around for some critical illness cover just for you for the same money..If you have children, then you will probably still need some life assurance.


When was the last time you discussed this with your broker..go back to him..he is surely going to try and help you if he is good..?

Not sure if all this helps or not??

Keep going though!

HelpWhereIcan

beaten to most of it by Sharpie

AuntyJean wrote:

H2 - BTL mortgage at £80K interest only for 15 years at a fixed rate of 4.9% for 3 years then 6.44% for remainder (variable). Payments (interest only) are £319.33pm and the income from the tenant is £595pm. Obviously there is tax and annual gas safety check etc to come out of the income. The mortgage is with Standard Life. There are early repayment charges if made within the first 3 years - 6mths interest yr 1, 5mths interest yr2 and 4mths yr 3. This mortgage has been going since Jan 06 and is taken in arrears. The actual mortgage commenced Oct 05. Have not had first statement yet. Also there is an early redemption fee of £185.

Cannot think of a need to change this - you have a good deal which you would be very unlikely to improve upon if you were to look at the open market.

AuntyJean wrote:

H1 is an interest only mortgage with Alliance & Leicester over 12 years. Completion was 8th March 2005 and at 4.8% variable for 24 months with an early redemption charge within that period, which was £900.86 (as at Jan 06). The interest then goes up to 6.84% with a Redemption Admin Charge of £295.

Again, no need to change lender as the deal you have is unlikely to improved upon enough to make paying the early redemption charge.

Cannot understand the advice you have received regarding the amount they will lend you being reduced by the balance on H2 though. A&L's lending criteria states:

"All self-financing buy-to-let properties will be ignored for assessment of affordability. Alliance & Leicester uses an affordability calculation to determine the maximum amount we will lend your client(s)"

It was slightly different last year, but not massively. Even still, A&L should be willing to look at a further advance on their SVR (so no ties) which could tide you over until you are able to remortgage in March

Your rental income is very good compared to the mortgage and it is unlikely that A&L will consider the property to be anything but a self financing buy to let. Use their calculator here to get an idea of how much they may lend you. If they will lend you £110k, that is likely to be the amount they will lend you on H1 because H2 is self financing.

Depending on your income, the calculator may be the problem as you only have 12-14 years over which to repay the mortgage. This means that it is possible that the A&L were willing to lend you less than some lenders who would work it out on a traditional income multiple basis.

AuntyJean wrote:

I am also paying £37.73pm into a Decreasing Term Assurance with Critical Illness cover. There is no cash-in value and this is in joint names. Is it worth continuing with this? It has been going since September 2001 and the initial value was £35,000.

Too hard to say with any certainty in a forum.

Putting aside whether you wish to have a policy that your ex will benefit from in the event of your death and vice versa; This will depend on whether you still have a need to cover the mortgage or your depedants etc. Unless you have cover elsewhere, it is unlikely that you will not need it at all and it would be unwise to have the mortgage completely uncovered.

If your adviser was indepedant, it is unlikely that you will be able to get better premiums now as you are 5 years older, but you also have to be aware that the definitions on Critical illness policies have tightened, meaning that any new policy you took out could cover less conditions (eg few companies stil cover angioplasty) or would only pay out at a later stage of an illness (as with some cancers).

The policy is also decreasing term which does not provide ideal cover for an interest only mortgage (as the balance stays the same), but some cover is better than none.

Get the policy reviewed by an/your adviser as part of a review and they will be able to give you your options better than I can in a forum.

AuntyJean wrote:

My mortgage broker is an IFA but he specialises in mortgages. His partners deal with the other side of investments, insurance etc.

Can only assume then that there has been some sort of misunderstanding re the amount the A&L will allow you in total. Get in touch and query the situation with them. A&L's criteria on this is widely published and I can only assume that there is a factor that they are aware of that I am not. Even if it is the difference in criteria between then and now; you should still be able to arrange a Further Advance as above.

AuntyJean

I have been speaking to someone today who has suggested that as I have been cohabiting for 9 years, regardless of H2 being solely in my name and the mortgage in my name he could be entitled to half!!!!! They likened it to me selling the property and having the money in the bank.

Please, please tell me this is not the case. If it is true then I hardly see any point in working my socks off to pay off two mortgages when OH will benefit without any contribution.

Again, I am loath to take legal advice as it cost me £200 for an hours session with a solicitor prior to buying H2 for him to tell me what I already knew. He did not mention anything about my partner being entitled to half of H2 even though he had all the facts present to him beforehand.

Sharpie

Hi Aunty Jean,

If you are cohabiting, then it counts for nothing, unless you co-own something jointly.

This is why people who live together have practically no rights, and that the "common law" myth is a waste of time (and another reason why the Civil Partnership was brought in to place, because that made the situation fairer for gay couples who were forced to cohabit because the law effectively would not allow them to marry).

As you are already divorced, ex hubby should have no claim on house 2.

There is a new Law Commission consultation paper going through at present, which may give rights to cohabiting couples, but only if the relationship is "intimate", which yours clearly isn't particularly as I think you said your ex has a new girlfriend..plus you acquired house 2 post divorce..

and (most importantly) you are only living "together" because you have nowhere else to go...so you are hardly "cohabiting" in the legal sense of the word..you are sharing a house...

Type in "Law Commission Cohabitation Paper May 2006" into Google, and you should get lots of info that should make you feel better!

Hope this makes sense..

keep smiling!

densol_2

As said above forget the cohabit worry. He has absolutely no claim on the first house unless you are married or entered into a civil partnership.

You need to find out how much you can borrow to buy him out. How much is your salary. How much is the house now worth.Lets presume the BS ignore the first mortgage as the rent covers the first house.

Can you afford to raise the difference between the value of the house and the mortgage - 50% and then deduct a bit for legal expenses etc- also offer him less may make him decide it is not worth arguing over.

Taking case to Court to force a sale is very expensive. You need to try and come to some sort of arrangement otherwise case can go on for years - already one year as your first post shows.