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If you kept the property, your mortgage would increase from where it will be, plus the 50% of the equity (worked out normally by market valuation minus the mortgage you have remaining divided by 2)
I imagine that this would make the new mortgage substantially greater than 10x income.
For a mortgage lender point of view, reducing your spending doesn't matter a great deal, the things that matter are credit commitments (loans and credit cards) and regular mandatory payments (maintenance, pensions, child care). As the most important factor is income, increasing this is the only clean way of borrowing more. Any additional work, freelancing, self employed work would need to have a track record via tax returns etc for it to be taken into account. I would assume a multiple of 4x income as an average.
If you sell, you pay the mortgage off, and you get your share of the lump sum of money. If you keep the property, you still have same money, it will be held in your property as equity, and you will be paying a mortgage for the difference.
If you had the cash, you could buy another property, but if you want to buy something similar, you would need the same amount of mortgage as you did before.
Acliff-
Thanks. I still didn't understand all of that...
But what I'm hearing is - I can borrow 4x income. I think we were around 4.5x combined income going in. And I'm unlikely to suddenly start earning more than twice what I do now, so this (keeping the house) just isn't going to happen as a scenario :(Am I right in thinking that if we were simply remortgaging, the increase in value benefits us because we have more equity, but with taking 1 name off the mortgage it's actually worse? (for me)
hoefla
Looking for some advice:
We (me+1) are 2 years in to a joint (not tenants in common) 5 year fixed mortgage. The plan is that at the end of the 5 years, at which point we were always going to remortgage, the house goes into my name alone. Went in with 20% deposit, deposit and repayments are 50/50 - I'm thinking when the time comes it will basically be that We sell the house to Me, and +1 takes out half of what it sells for.
The problem is that we originally borrowed 10x my annual income. And I can't, currently, afford the repayments alone. I would very much like to keep the house and not end up just selling up completely, but I'm not sure what the best approach is. I'm thinking if I can sort my shit out in the next 3 years I'll be in a good place when it comes to speaking to the bank.
I might be able to manage 1 and 2 in combination (without changing jobs), by doing some freelance and saving some money each month, but that would depend on engaging an as-yet untested level of financial discipline.
The equity thing is also confusing me. The value of the house has no doubt gone up, we will get a proper valuation at the time. What confuses me is: I have enough to replace half the original deposit (inheritance: fuck the rich... ), but probably not half the increase in value. When We sell I'd be getting the benefit of the increase and having to pay half of it out immediately, but if it is Me doing the buying I'd need an even bigger, less affordable mortgage... is it a win or a lose?