Adding a Partner to a Mortgage
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Adding a Partner to a Mortgage
Steven Hargreaves talks us through the process of adding a partner to a mortgage.
How do you add your partner to your mortgage?
If I had a mortgage and I wanted to add you to it, we would do a ‘transfer of equity’. I’m effectively transferring some of the equity in that property to you.
If there was no mortgage involved, I would just add you to the deeds for the property through a solicitor. If there is a mortgage, you’re added to that and it will now be in joint names.
In due course, the deeds will be updated to reflect that you now own part of this property and it’s jointly owned.
What is it called when you add someone to your mortgage?
It’s called a ‘transfer of equity’.
Do I need to contact my current lender to add my partner to my mortgage?
Yes, you do, but it all depends when it’s happening. Let’s say you and I had got together, but there are nine months left on my current fixed rate.
I would most likely leave it in my name for the next three or four months, and when we remortgage, we’d do the transfer of equity at the same time. The benefit is that it’s cheaper, simpler, and because we’ll possibly go to a new lender anyway, we can kill two birds with one stone.
Obviously, if I’m in the middle of a five-year fixed-rate deal, you won’t want to wait three years to be added to the mortgage. In that case, I’d contact the lender to do a transfer of equity, and the lender would do it rather than the mortgage advisor.
Do I need to stay with my current lender?
As per the last question, if we’re two years into a five-year fixed rate, there’s no benefit in coming away from the existing lender because we’ll have early repayment charges. To add another person to your mortgage, you wouldn’t necessarily incur penalties.
What is the first step when adding a partner to a mortgage?
If an existing client contacts me wanting to add a new partner to their mortgage, I’d guide them through it. I might send them back to the lender to do that transfer of equity, and to appoint a solicitor.
Solicitors are involved, because there’s legal documentation, deeds to be signed and land registrations to amend.
Sometimes a previous partner needs to be taken off the mortgage at the same time as a new one comes on. A lender in that case may not let the existing client off the mortgage unless new borrowing has been approved.
All borrowing is income-tested and credit checked. If my previous partner earned £50,000 a year and we needed all her income to support the mortgage, and my new partner is on £20,000 a year, we might not be able to do a transfer of equity if we didn’t have the affordability.
This can be where existing clients contact me and ask whether that lender’s decision is right. I can chat through it with them and point them in the right direction.
Do you need to remortgage when adding a partner to a mortgage?
It depends on when you’re doing it. There’s no point in going through the cost twice. As in my first example, if I was nine months away from my deal ending, there’s no point paying fees to add you to the mortgage and then paying more fees when I remortgage away from that lender. I may as well wait and do everything at the same time.
It works out cheaper and is also simpler. There’s just one set of solicitors’ fees to cover the transfer of equity and the remortgage. Otherwise, there’s a fee for the transfer of equity and land registration, and then another for the remortgage.
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What fees are involved when adding a partner to a mortgage?
It’s situation-specific, because in some cases there could be stamp duty to pay. It depends how much the property is worth, and whether the person coming on owns any other property.
There will usually be solicitors’ fees. Interestingly, if we’re doing a remortgage with free legals, doing a transfer of equity at the same time normally only costs another £150 to £200. That’s why this is the most cost-effective way of doing it.
If you do it mid-term, it might cost you £400 to £600. Doing everything simultaneously is normally much cheaper.
Will my partner be credit checked in the process of being added to my mortgage?
Yes, very much so. They are credit checked and will need proof of income. The lender will do all the checks as for a normal mortgage, because they don’t want any issues with mortgage payments.
If my previous partner had a £50,000 income and my new partner only earns £20,000 and has County Court Judgments, the new lender simply won’t let the existing partner off the mortgage.
My own income plus the new partner’s wouldn’t be enough, plus they have adverse credit.
It’s just treated like a new application.
Will my partner need to provide proof of their income to be added to my mortgage?
Yes. They would need payslips or accounts, and tax overviews and tax calculations if they are self-employed or run a limited company. They would need proof of income, plus bank statements.
Do we have to be married to add my partner to my mortgage?
No, not at all. You don’t have to be married. You can add somebody to your mortgage or take somebody off – it’s just means tested.
Do you need a solicitor to add someone to your mortgage?
Yes. The cost will depend on where you are in the country and how much solicitors charge there. It can be vastly different. The solicitor I use would charge about £500 for a transfer of equity.
That’s the benefit of doing it at the end of the term when you’re remortgaging. A free solicitor for the remortgage will only charge you £150 to £200 for a transfer of equity.
I did come across a solicitor in the south of the UK that charged £750 for a transfer of equity, which I thought was extortionate.
How long does it take to change the name on house deeds?
Effectively you would change it on the mortgage, and the solicitor would add it to the deeds at the same time. The Land Registry can take three to six months to update their systems.
You’re already on the mortgage and the deeds – but you just haven’t got the documentation confirming that yet.
If I did a remortgage today with a transfer of equity, I would have the mortgage approved within five to seven days. Then it’s down to the solicitors to get to completion, and the Land Registry to complete the paperwork.
How can a mortgage broker help here?
If you’re dealing with a good mortgage advisor, they’ll talk you through it and explain what’s needed.
We’ll make sure you won’t request this with a lender and then be declined, because there’s not enough income on the application. If you’re speaking to a mortgage broker, we’ll explain that at the outset.
If your previous partner was on £50,000 a year and your new partner’s on £20,000, the affordability won’t work. We can prevent you from wasting your time. We make the process smoother and more streamlined.
Key Takeaways:
- The process of adding a partner to a mortgage is called a ‘transfer of equity’.
- It is generally cheaper and simpler to complete the transfer of equity at the same time you remortgage, particularly if your current fixed-rate deal is ending soon.
- All parties being added to or staying on the mortgage must undergo a full income-tested and credit check process, as the combined income must be sufficient to support the borrowing.
- A solicitor must be involved in the process to handle the legal documentation, deeds, and land registration amendments.
- A mortgage broker can help streamline the process by confirming affordability and ensuring you don’t waste time on an application that is likely to be declined by a lender.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
For specialist tax advice, please refer to an accountant or tax specialist.
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