Key Post Will the bank allow me to get his name off the mortgage?

Brendan Burgess

Brendan Burgess

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Skeleton post. I am compiling a Key Post and would welcome links to any case studies or other information on askaboutmoney or elsewhere. If you have been in this situation, please let us know how you got on, whether you were successful or not.

Summary

If you have a joint mortgage, you are jointly and severally liable. In other words, if you don’t pay your share of the mortgage, he is fully responsible for the full amount, and not just “his half”.

The bank is under no obligation to release one party from the mortgage.

The bank will only allow you to take his name off the mortgage, if you would qualify for a loan of the total amount in your own right.

If you are allowed to take over the mortgage, you will be buying his share of the house and will pay 1% stamp duty on the value of the property bought

If you have a cheap tracker, the bank may tell you that you need a new mortgage which would be at the SVR. However, customers from Ulster Bank, Bank of Ireland and ptsb allowed people to retain their trackers.

The bank will not allow his name off the mortgage if

  • You would not qualify for a loan of that amount in your own name
  • You are in negative equity
If it’s a borderline case, you can try the following to encourage the bank

  • Pay a lump-sum off the mortgage ( Ulster Bank proposed this in this case)
  • Get someone else to replace his name on the mortgage
  • Get a guarantor


If the bank does not agree to allow him off the mortgage, you can do a deed of assignment, whereby you take full responsibility for the mortgage payments and he renounces any interest in the house. This does not affect his relationship with the lender – so he is still fully liable for the loan.

If the mortgage is in negative equity, you will need to calculate how much he should pay to have his name off the mortgage. A guide to splitting up while in negative equity
 
Scenario 1 - The standard, simplest case

Her income|€60,000
His income|€30,000
Value of property|€130,000
Mortgage |€100,000
Interest rate| SVR 4.5%
The bank will be happy to let her take over the mortgage

  • She can afford the repayments on her own
  • The mortgage is 77% of the value of the house
  • It is a SVR mortgage
As there is €30k equity in the house, she will have to pay him €15k for his half-share in the property.



Procedure

  • She buys his share of the property for €65,000
  • She pays 1% stamp duty on the purchase or €650
  • The bank issues her with a fresh mortgage for €100,000 with which she repays the old mortgage
  • Presumably there are legal fees of around €1,000 involved for this
 
Scenario 2 - No risk but a cheap tracker

Her income|€60,000
His income|€30,000
Value of property|€130,000
Mortgage |€100,000
Interest rate| Cheap Tracker ECB + 1%

The bank will try to get her to take out a new mortgage at the SVR so they can be rid of the cheap tracker.

A number of posters on askaboutmoney who were initially refused, managed to persuade the lenders to allow them to retain their trackers.

Windy was initially refused, and was told that only First Time Buyers would be allowed split. But the bank eventually relented.

I don't think that a person in this situation has any right to take over the mortgage on their own. The bank is within its rights to refuse. This is a commercial credit decision for them, and the Financial Services Ombudsman would not get involved.
 
If the bank does not agree to allow him off the mortgage, you can do a deed of assignment, whereby you take full responsibility for the mortgage payments and he renounces any interest in the house. This does not affect his relationship with the lender – so he is still fully liable for the loan.

If the bank refuses to allow you to take over the mortgage on your own, you can reach a side agreement with him.

You agree to take full responsibility for the mortgage.
He agrees to renounce his interest in the house - if it rises in value, you get the benefit. If it falls, it's your loss, not his.

But there are big downsides for him in this arrangement

  • He is still liable to the lender for the mortgage, if you default.
  • If you go into arrears, his credit rating will be affected as his name is still on the mortgage
  • He will probably find it difficult to get a mortgage as the new lender will treat him as already having a mortgage
 
Hi there - I would like to know more about deed of assignment. I am divorcing in uk but have irish property in negative equity with ex who has no job and pays nothing towards mortgage. Our uk financial settlement states I pay the mortgage and he signs title over to me - but bank not willing to change mortgage so a deed of assignment may be worth looking at until property paid off.
 
Hello there,

Brendan Burgess said:
Scenario 1 - The standard, simplest case
......
  • The bank issues her with a fresh mortgage for €100,000 with which she repays the old mortgage
.....
Click to expand...
Wouldn't there also be a disadvantage to the fact that a fresh mortgage is issued? In this scenario she would be back to a situation, as with the original mortgage, where she would be mainly paying interest for the first few years again. Therefore she would end up paying more in the long run than if she could continue to pay the original mortgage.
Am I correct in my interpretation here?

Thanks
 
amateurbuyer said:
Hello there,


Wouldn't there also be a disadvantage to the fact that a fresh mortgage is issued? In this scenario she would be back to a situation, as with the original mortgage, where she would be mainly paying interest for the first few years again. Therefore she would end up paying more in the long run than if she could continue to pay the original mortgage.
Am I correct in my interpretation here?

Thanks
Click to expand...

No, no, no.

I really will have to write that Key Post about how to think about mortgages.

Thanks for giving me another example of faulty thinking.

Johnny and Mary have a mortgage of €100,000 with 20 years left.

Mary takes out a new mortgage of €100,000 with 20 years left to repay the old mortgage.

The repayments are exactly the same.

The common fault here is the crudeness of the expression "Most of the repayments in the first few years are interest". I am sure I have said this myself.

The newness of the mortgage is not relevant.

It is the remaining term which is the most important factor. ( The interest rate is another factor)

Take a mortgage of €100,000 at 4.5% interest.

The interest on this loan will be about €375 per month in the first year.

If you have a €100,000 mortgage with 30 years remaining, the repayment will be €506, so 74% of the repayment is interest.

On the other hand, if you have a €100,000 mortgage with 20 years remaining, the repayment will be €632 so 60% will be interest.

Finally, if you have a €100,000 mortgage with 10 years to remaining, the repayment will be €1,036 so only 36% will be interest.

(The interest will be a bit less for 20 years, and less again for 30 years, but let's not complicate the principle)
 
Hi B,

Thanks for your response. Please excuse me for saying but the phrasing in your reply is a little unclear. I presume the examples for 30, 20 and 10 years are referring to different options for the repayment period of the mortgage. Is this correct? The first few times I read it it seemed like the repayments were going up during the lifetime of the mortgage (30 years to go -> 20 years to go -> 10 years to go...)
 
Hi

I see exactly how my wording was unclear.

I presume the examples for 30, 20 and 10 years are referring to different options for the repayment period of the mortgage.
Click to expand...

I am not referring to different options as such, but to the remaining term of an existing mortgage. If you are 20 years into a 30 year mortgage, you have 10 years remaining now. If your mortgage amount is €100k, your repayments will be primarily capital.


I have now amended it.

Is it clearer now?

Brendan
 
Thanks for clearing up the wording. All the percentages are clear but I don't get how the monthly repayments increase from €506 per month with 30 years remaining, to €632 per month 10 years later (20 years remaining), to €1,036 per month a further 10 years down the line (only 10 years remaining).

If we assume the interest rate is kept constant, what is changing?
Apologies for my naivety but when calculating my mortgage I did not take this into account.

Thanks
 
Hi

I didn't clear it up enough obviously.

I am talking about three separate mortgages here.

If you have a €100,000 mortgage with 30 years remaining, your repayments will be €506.

After 10 years of this mortgage, there will be 20 years remaining and some of the capital will be paid off, so the repayments will still be €506.
 
Hi B,

It's clear now thanks. That is actually what I meant when I said "options for the repayment period". I meant in terms of years. Looks like we were both on the same page to begin with.

Thanks again for clearing it up though.
 
Hi Brendan, In the "summary" section of this thread, in the 4th sentence you said that a person being allowed to take over the mortgage would be buying the share of the house and would pay 1% stamp duty on the value of the property bought.

Is that value (a) value when originally bought, (b) current value as in LPT say, or (c) present mortgage amt. eg. Bought: 300000 , current value :160000 , mort remaining :260000. ?

Whichever pertains, it means that the person taking over the mort will pay stamp duty for a second time on the same property.? Are there any exemptions ?


Later you say that a person will not be allowed take over a mortgage if there is negative equity. But if it is agreed with the lender that the person taking over has the ability to repay the entire mort. why is there a problem even if that includes negative equity figure ?
 
Hi

The 1% stamp duty is on 50% the current market value of the property. It has nothing to do with original value, LPT or mortgage.

I can't think of any exemptions. I think if a husband buys a share in a property from his wife, he must pay stamp duty.

Later you say that a person will not be allowed take over a mortgage if there is negative equity. But if it is agreed with the lender that the person taking over has the ability to repay the entire mort. why is there a problem even if that includes negative equity figure ?
Click to expand...

I have edited that to "probably". Even if someone has the capacity to pay the mortgage, that capacity or inclination might change. So their security would be a lot less. If I were a lender, I would not let someone off a mortgage in negative equity. I would require them to pay down the negative equity, either in part or in whole.
 
Thanks for clarification. Joint mortgages and subsequent breakdown of relationship is extremely difficult to rectify.

Perhaps new thinking is needed to make the relinquishing of the payment of the mortgage by one, less fraught.

If one half has the capacity to pay and the other has left the property to live a life elsewhere, a lender should, on an affidavit or such by both, allow the other take over and henceforth be considered like any other mortgage holder : if the mortgage is performing, no problem, if it falls into arrears down the line then be treated like anyone else in a similar situation.

The one who has gone can then aspire to accommodation for themselves rental/mortgage while the other has a (probably) large mortgage but a roof over their head.

I think the paying of stamp duty on acquiring the 50% of the value should not pertain as that person and the lender are exonerating the other of their contractual obligations.

Is this something the law and the lenders would bah humbug ? Why?

or is this more unclear thinking?
 
I would put it this way:

Stamp duty is a tax. Whether you are buying the whole house from a previous owner, or buying 50% of a house from your previous partner, it is still a sale, and although it sucks, there is a tax on that sale.

If we were to use the argument that the stamp duty was being paid on the same property for a second time, this could also be used when buying from the previous owner. They paid it when they bought, and you pay it when you buy it.

At the end of the day you either pay 50% of the stamp duty for 50% of the house, or 100% of the stamp duty for 100% or the house.

Apologies that I have nothing positive to add!
 
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