Owning your own home

The one a few people on here have used is Worktop Express, but they're just wood.

I wasn't actually that impressed with their service to be honest, but the prices and products are excellent.

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.

Yeah sorry, 2.6m2 - based in Hackney Wick, tiles are 30x30 and I suspect there is some awkward cutting involved as the shape is actually more ? than C.

From what Ms Hammer said (I wasn't there when he came round to look at it) he seemed professional but almost had dollar signs in his eyes when she told him the tiles she was thinking of getting (since abandoned) and I think chipping on the materials at the end was cheeky.

I'm not sure what site she had the job on before but I saw some quotes and they were all either of the '£100, 1 day, will do good job promise' variety or just never answered phone calls etc. Maybe tiling is in serious demand these days?!

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)

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?

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...?

Ex-partner - we are doing okay as housemates but both foresee that it's probably not a great idea long term, and identifying a point at which to split (or even if they remain living here, it's as a lodger, so they have something they can go buy another property with).

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)?

Thanks - that's the one I had in mind. Prices do look good.

Cheers. That's really helpful to know.

As I said it's more that I meant to do it earlier so I keep looking at it as possibly 6 months +joining bonus rather than 1-2.

On the tenants in common point. Yes. But I was adding that aside from the legal ownership structure you want a predetermined exit and provision for when things go wrong.

If Dick and Sally break up and want to sell their share, but you can't buy them out, what happens? Or if they turn out to eat all your cheese and never wash up, how long do you have to stick it out for?

I doubt the lender would take income from a lodger into account. It's an arrangement that doesn't exist yet, and if you were to tell them that it's your ex partner but don't worry we're still mates... I suspect they wouldn't put much stock in that.

If you're borrowing more than 5x earnings then you might have some problems. Disregard the history, disregard the fact you're already living there (because the lender will). As far as the lender cares, you're just buying a house with some equity and borrowing the rest.

You should be able to figure out fairly quickly what the house is worth (ballpark, using Zoopla and nearby sales). So you'll be able to get an idea what % deposit you have and what the multiples are. Then just look around for some mortgage deals to see what's available.

I was looking into my mortgage earlier on. To make sure I'm not completely misunderstanding things and using simplified numbers, I reckon the position we are in is as follows.

Borrowed £230k at 95% LTV

Got a rate of 4.79% fixed for two years.

Pay £1300 per month and the interest charges are about £900 per month.

So we've been chipping approx. £400 a month off the value of the loan.

I reckon at the end of the 2 years, we will owe about £215k - £220k (if I do not overpay before then).

The way the property in our area is going, it is not inconceivable to me that ours could be worth £300k by that time.

So, If we owe £215k, that is the value of the "new" mortgage we would need to get.

If the flat is worth £300k, the LTV of the "new" mortgage would be 72% and would therefore afford us a better rate on the new mortgage?

There are a lot of simplifications and assumptions here but am I miles out?

That's pretty much it.

Every time I've remortgaged I've given my IFA an estimate for the increased value of the property and it's only ever been questioned once; and the mortgage company sent a valuer who ended up agreeing with my estimate anyway.

The mortgage company can see how much you bought it for and when, and how the prices have increased on similar properties or your area, so they'll likely take a new value if it's reasonable.

One thing to note is that the value a mortgage company assigns to a property isn't necessarily the same as the price that people are willing to pay for the things.

Assuming we wanted to buy a property from someone who agreed to sell it to us at less than market value would banks be shitty about that from a mortgage perspective?

Say value is 300k and prospective sale price is 240k. Say we had 40k savings plus stamp duty/legal costs and wanted a mortgage of 200k. Would we be OK getting that full 200 or would they question it because of the market value of the property?

Can't see why they'd care, you'd just need to tell them why. There's nothing stopping you selling a house for £1. It wouldn't be much different to you providing £100k against a FMV of £300k.

The fair market value of the property will be used as far as CGT/IHT is concerned, but that shouldn't affect getting a mortgage on the property, and CGT shouldn't affect you, IHT might but depends on the circumstances.

Someone I work with did this. Banks look at the value (£300k) vs the loan (£200k). Not the purchase price.

We bought ours for £239,950 about 7 months ago.

This is now on just across the road from us. Our is a 2bed maisonette, refurbed before we moved in, has GCH and we have our own garden (complete with hyper-awesome-mega-shed).

http://www.zoopla.co.uk/for-sale/details/37230939?search_identifier=15e8bf68b4fa3bba5d2bb43b5761bc88#5e1JqO3SGkDz7BSe.97

I would reckon ours should be valued above that.

As far as the lender cares, you're just buying a house with some equity and borrowing the rest.

Yeah I guess I wondered whether this is it - my assuming that the only way to take a name off the mortgage is to sell it to the person who wants to stay on. At least we don't pay stamp duty, right?

Just did some quick calcs, and the gap between likely new borrowing, and amount someone will lend me based on income is in the region of £140k :/

Thanks for this. I missed your input somehow.

I think I'd thought of most of these issues. The area we're looking at is sky-rocketing at the moment and every offer we (EDIT: the two of us rather than the four) make is being out bid by a colossal margin. I think when we eventually part ways we should be doing ok, not least because the repayments are tiny between the four of us so we'll be putting down the maximum overpayment and saving as much as we can.

Also, the cost of improvements will be split four ways (and both one half of the other couple and the father of the other half are architects).

Just don't mention Fleetwood Mac. Not post Peter Green, anyway.

That settles it then. Now we just have to actually get the house.

I doubt the house will have gone up 30%

We had 3 independent valuations and chose the middle one, when it came to valuing the property after we split - no sense muddying the waters with accusations of trying to do the other one over on money.

Lenders should be looking at your ability to repay (now and in the future) based on incomings and outgoings. The multiple is just a rule of thumb. If you have lodgers, this should count in your favour.

At least we don't pay stamp duty, right?

If you're getting divorced (or ending a civil partnership) then you don't pay it as long as it's all sorted out by an agreement or court order that's part of the divorce/dissolution proceedings.

If you're unmarried you'll probably have to, on the value of the chunk being transferred to you (cash you're paying your partner plus whatever share, e.g. 50%, of the outstanding mortgage amount).

Article from 2009 but it doesn't look like things have changed: http://www.theguardian.com/money/2009/sep/30/stamp-duty-land-tax

I'd seek proper advice on this.

would banks be shitty about that from a mortgage perspective?

HMRC might, from a stamp duty perspective.

Cheers @TW and @Greenbank useful stuff. Don't worry we will definitely be getting Proper Advice when the time comes and not just winging it on what someone on the internet said. 3 valuations is a good shout. We are keen to keep it as fair as possible. Stupid Stamp duty... there goes another 5k...