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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-
Probably easier to understand with simple numbers, and not worrying about estate agent and solicitors costs etc.
Buy property 2 years ago for £100000. with a 20% deposit, £10k each.
Your mortgage was £80000.In 3 years time, house prices have gone up, say to £130000. (30% increase)
Your mortgage is lower, maybe at £70000 as you have been repaying it.1) If you sell:
You sell for £130k, and your mortgage is £70k, so you are left with £60k.
You divide this between you both, and you both leave with £30k, which is £20k higher than you put in at the beginning.2) If you remortgage together and keep the mortgage the same
Your property is valued at £130k, and your mortgage is £70k, so you now have 46.1% deposit/equity in your property. This will give you access to some of the market's lowest rates, compared to the ones you had when you bought 2 years ago with the smaller 20% deposit. Your monthly payments are likely to reduce drastically (to the point where it is almost a good idea to review things now, even if you have a hefty penalty to change lender)3) If you want to keep the property in your name:
£130k is the value, and the current mortgage is £70k. You need to give £30k to the other person (50% of the equity), so your new mortgage needs to be £100k. This is 23% deposit remaining in your property for you to speak to your current mortgage lender, or a new mortgage lender about.Hope that makes things a bit clearer?
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Problem is that I don't think you're taking one name off the mortgage. You're getting a new mortgage on a house that has now gone up in value. You'll have more equity but you'll now be borrowing the rest based how much you've agreed to pay the other person.
Is the other person a friend that's moving on and you're buying them out, or a partner that's staying there and you're just transferring mortgage into your name...?
Acliff
duncs
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.