Question; I have a joint mortgage currently; we want to change it to being solely in my name or my partners; what do we need to do?
Firstly you need to establish whether your existing mortgage is still within any tie-in period and what penalty for early repayment may apply.
Then you need to check with the lender whether they are happy for the mortgage to transfer to a sole basis, which will mainly come down to their assessment of whether it is affordable to you as a single applicant.
They will re-assess the affordability of the case as if it was a new mortgage. If they are happy you can afford it alone, then the land registry and title will need amendment and a new mortgage contract issued.
That process will require a solicitor or conveyancer to act; you will have to pay for a transfer of equity, usually costing a few hundred pounds.
Depending on the size of the mortgage and the property valuation, it is possible stamp duty may also be chargeable. You should consult your conveyancer on this aspect, as it is a complex field.
However, if the lender is not satisfied the loan is affordable to you alone, they can refuse to remove a party from the loan. That would mean finding a different lender and paying any early repayment penalties to change if a suitable option is available.
If an early repayment penalty is due to end within a few months, you may be able to arrange this as part of a normal remortgage and defer completion until the penalty ends. If it ends more than six months from now, or if you require the release of the other party sooner, you have to pay any applicable penalty.
As well as affordability, the lender will usually re-assess you as a credit risk and possibly the property value.
If you are considering transferring a party from a loan due to bankruptcy proceedings, the solicitors will be made aware of this, and the transfer will not be possible.
As usual, if you need further information about this call 0345 4594490 to speak to a mortgage advisor about your circumstances.
Question; I intend to move out and let my property with a residential mortgage on it; what should I do, and is this ok?
Firstly, it’s a typical condition of almost all residential mortgage contracts that the property is not to be let without the lender’s consent. So you should always speak to your lender first and see what they say.
Most lenders will be relatively helpful with this; there are numerous reasons people choose to let what was once their home, and it’s a common occurrence.
Some lenders may want to change the mortgage contract to a buy-to-let type; others may change nothing until the current mortgage is out of its initial term.
A lender is unlikely to give you a positive response if you only entered into your mortgage contract very recently. If they did, few people would bother paying the higher interest on a buy-to-let mortgage and would take a residential mortgage and switch it a week later.
You will also need to look at your buildings and contents insurance; it will likely invalidate your policy if you are not the primary occupant.
Tenants are more likely to ruin a property than the owner, so your home insurance may be a little more expensive.
You also need to make sure you comply with all the regulations around being a landlord as regards gas inspections and using a secure tenants deposit scheme to avoid any litigation in the future. You should also investigate if any licensing schemes are applicable with your council.
As usual, if you need further information about this call 0345 4594490 to speak to a mortgage advisor about your circumstances.
I wrote an article some time ago about the FSA’s proposed changes to end self-certification and fast-track mortgages; I made a big point about how this could leave many people struggling to refinance and cause trouble for the recovery of the housing market.
The FSA confirmed last week that they would take action; the press has been making similar observations to my own today about the impact any regulation could have on our recovery and those borrowers with an existing loan of this type.
But over the weekend, I had a realisation; and made a U-turn on the subject. In reality, there are few legitimate borrowers who cannot “prove” their income.
The point is that the word “proof” and its interpretation is the key detail. Almost all people can show evidence that the income they declare is broadly accurate; they may not be able to prove income in the manner that a traditional full-status mortgage would require.
For example, if you have a business from which you could take far more income than you currently do without running it into decline, that is your prerogative.
You should still be able to evidence in a suitable way that your business has the potential for you to take further income and that the loan would then be affordable.
It may not be satisfactory at your local building society now, but lenders with good product development teams will soon see how to create a new type of product to cater for this market once their appetite comes back.
So if the FSA gets this legislation right and does not dictate or define what proof consists of, then there will still be the opportunity for lenders to market products for those with non-standard income, priced above full-status products as before but simply requiring some evidence to back up that the income declared is not a total fabrication.
The FSA just need to be careful not to try and make this legislation so watertight that it chokes the housing market to death.
There have been muted announcements from the FSA that indicate they may ban fast-track and self-certification mortgages for people in full-time employment; there still seems to be a lack of understanding of what self-cert is for.
Self-certification lending is intended for those who cannot prove their income; or for whom traditional lending practices of considering variable income at a rate of 50% would cause unfair difficulty in borrowing.
Many types of employment are paid predominantly in commission income, such as recruitment consultants, estate agents, business development managers and stock brokers.
These are all forms of employment that may produce a need for self-certification.
Others that own a business which produces very irregular income streams; such as those in the tourism sector; or paid upon completion of irregular contracts, may also need to self-certify; particularly when self-employed.
What it is not is a means to inflate income. Lenders will withhold the right to contact employers and ask for bank statements and other supporting information. So if the figures are out of the ordinary, lenders should be asking questions; hopefully, if the FSA keep this in mind, it won’t be banned.
There is a home for self-certification that shouldn’t be ignored.
Hello, and welcome to this first post of the broker’s blog.
As my first topic, I wanted to comment on Gordon Brown’s recent suggestion that there may be a move to regulate the affordability models banks and building societies use when determining how much to lend.
I am probably one of few people in an industry based around percentage commission to think this is potentially a good idea, but I am all too aware of the dangers of getting it wrong.
We currently have a dual regulation system with mortgages being FSA regulated, and non-residential or second-charge lending is essentially unregulated outside of the limited involvement of the OFT (Office of fair trading).
There’s no point regulating affordability on first-charge residential loans without bringing second-charge loans and buy-to-let mortgages into the same body of regulation.
Or the effect will be to encourage further the misuse of buy-to-let mortgages to get a larger loan, leaving the market open to abuse and encouraging people to take more expensive second-charge lending for debt consolidation.
It is important not to get carried away with the sentiment of the moment and bodge regulation just because it seems like a good idea to bring the banks into line with each other.
Perhaps the question should be; is it time to regulate all non-commercial lending under the same body? As well as limit the affordability calculation used (and I include buy-to-let lending within non-commercial).
The answer is probably yes.
However, even then, there is a difficult question to consider; how do you regulate that without leaving many people locked out of a re-mortgage?
Because whilst it is favourable to have control over the fire of house price inflation, it isn’t a good idea to lock people on existing 4 to 5 times income mortgages out of competitive new rates; whilst at the same time leaving them exposed to their variable rate and every change of bank base rate.
Whatever the government does decide, they need to think carefully about how to do it without leaving thousands of people in even more danger of mortgage default.
Another important aspect is it will likely further the reduction in house prices which would, at present, leave people deeper in negative equity.
There are still many areas where the average first-time buyer can’t afford to buy at four times their income. So the market is still generally overpriced, and bringing in this type of regulation could worsen the pain of the credit crunch for many, particularly for those who have pushed their income further and are already treading water with repayments.
So, in my opinion, whilst regulation is needed, a bull in a china shop approach could be disastrous.
