Adding someone to a mortgage is quite a common process. The reasons behind it may vary but the process is broadly similar. Often a parent or parents will want to add their son or daughter to their mortgage. This could be done to mitigate inheritance tax duties (but this will only work if your daughter lives in the house with you) or perhaps for an income earning child to help a single parent with their mortgage. Whatever the reason, in this article, can I add my daughter to my mortgage, we take a look at the process and mechanism involved.
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What is the legal position?
It is advisable to consult a solicitor before adding someone to your existing mortgage as there may be implications that you may not have considered. There are two options you can choose from when adding someone to a mortgage.
- Tenants in Common
This normally occurs when friends or siblings own property together. In this situation, the parties involved typically own a percentage of the property. It doesn’t have to be 50/50. In the event of the property being sold, the equity would be split depending on the percentage rights.
If one party dies, the remaining part of the property would pass to the owner’s next of kin or named beneficiary. It would not automatically pass to the other tenant-in-common. This is a very important point to consider.
- Joint Tenants
Joint tenants is the most common option. Both parties would have equal rights to the entire property. In the event of a death, the property would be passed on to the other owner.
It is important to make sure that you change any wills you have made in order to keep them up to date.
What is the process involved?
Generally speaking, your main options would be twofold if you need to add someone to your mortgage. You could either add them to your existing agreement through a Transfer of Equity, or refinance your mortgage and switch to a new joint agreement.
You will need to contact your lender to apply to have your daughter’s name added to your mortgage. They will be subject to the same standard checks such as income and affordability as a new applicant for a mortgage. Consequently, it isn’t a formality to add them onto your mortgage if they have a poor credit score. From a lender’s perspective, having another person’s name on a mortgage can offer them more security. Nonetheless, lenders will still carry out their usual checks to make sure that the mortgage is affordable for the new homeowner. You may also be charged stamp duty. This is because your daughter is technically purchasing part of your property. Adding your daughter to your mortgage also involves making legal changes to the property deeds.
If the lender’s criteria isn’t met, then they are under no obligation to add your daughter to your mortgage policy.
Also, it is quite possible that your lender will charge you an administration fee to make the changes.
Adding someone to an existing mortgage is a legal process. You’ll need to instruct the services of a solicitor. Bear this in mind when considering what costs are involved. As mentioned above, there may be stamp duty obligations that will need to be satisfied.
Remortgaging to a joint policy
Another option is to remortgage and apply for a joint mortgage. In effect, you will be applying for a completely new mortgage.
If you’re not tied into the fixed-term with your current lender, then remortgaging should be relatively straightforward. You can look for a new mortgage policy either with your current lender or a completely new lender altogether. In this instance, your debt will be transferred.
If you are tied into a fixed-term, then remortgaging (in order to add someone new onto the policy) probably won’t be the best option, because you’ll likely be subject to early repayment charges. In this case, you could either add your daughter to your existing policy (as already discussed) or wait until your fixed term expires, and then look at remortgaging to a joint mortgage.
Can I replace one person on the mortgage with somebody else?
Replacing one person on your mortgage with another is possible. The process involves removing a person from a mortgage and then secondly, adding the new homeowner. This can all be done during the transfer of equity.
Replacing one homeowner with another can be straightforward. This is normally the case when the new homeowner meets the affordability criteria of the lender. Removing a person from a mortgage can place an additional cost on the remaining owner as their share of the repayment amount will increase. That said, having a replacement has the opposite effect, as it can provide additional capital to buy the previous owner out.
How we can help
We have a proven track-record of helping clients add a child to their mortgage. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Residential Property Solicitors
It is important for you to be well informed about the issues and obstacles you may face during the transaction. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Residential Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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