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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?
Acliff-
Thanks. I want 3...
In the example you made, the difference is that I don't need to borrow the full amount of 50% equity, so possibly the increase in deposit relative to house value will be more. Although I doubt the house will have gone up 30%, this is London so who knows. Still, regardless of how good the deposit is, if the amount I want to borrow is more than, what 5x income - it isn't possible? Do lenders take likely income from lodgers into account (in a way that makes any difference)?
hoefla
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)