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A plan for how DP and I could get a mortgage together ... a good idea or not?

(15 Posts)
houseworkallergy Sat 09-Feb-13 15:46:13

My ex and I are currently named on the mortgage for the former family home, where DS and I still live - now with my partner (and his children some of the time). 

My ex would like to come off the mortgage before the year's out, so he can buy somewhere himself, and so we planned for my partner to go on it in his place. However, we were on the cusp of sorting this late last year, and then my partner was made redundant.

My partner has had no luck finding a new job yet (he'd need a permanent role in a similar line of work to before, to be able to borrow). So he's doing some self-employed work for a friend, which has grown to about a six-month project ... great for income and flexibility around the kids, but useless for getting the mortgage.

So, another friend who runs a business has offered to create a suitable job for DP, to enable us to take on the mortgage together. Officially, it would be for a full-time, permanent post. In reality, DP would be paid just for long enough to sort the mortgage. He'd also work part-time so he could honour his self-employment commitments, and then continue helping our friend's business out after pay stops, to in effect make up the time he'd have been paid for.

This could solve our problem with the mortgage and enable us to stay in our home, which we'd desperately love to do. I know we can afford the mortgage; we're already affording it, despite the last few rocky months. It's an incredibly low rate - we're paying less than half what we'd be paying if we took out a new mortgage now, and I have a decent savings buffer to see us through this blip in DP's career. But none of this is taken into account in the lender's calculations. So I feel this idea is a way of circumnavigating the shortsightedness of "computer says no", and keeping a family settled in a home they can genuinely afford.

But I worry it's in some way illegal. Tax and NI would be paid, of course. But DP wouldn't be working full-time, nor permanently, so I suppose the contract would be fraudulent. No other employees would know the nature of his contract/pay ... but it still doesn't sit 100% comfortably with me. That said, if we don't do this, I don't know what we'll do.

What do you think? Is it above board at all/enough? If not, what could the consequences be for us, if we were seen to have done something wrong? Or am I worrying unnecessarily and should we just go for it? 

Thanks for any advice.

CajaDeLaMemoria Sat 09-Feb-13 16:03:03

Hmm...my legal experience is minimal, because I've only been training for a while, but I'd say that this is a terrible idea.

The reason you find it uncomfortable is because it's fraudulent, and you would be getting a mortgage based on fraudulent information. Whether you'd be found out is a different matter.

How long does your friend propose he employ your DP for? The mortgage company may ask for proof of earnings that span a period. Will he pay tax and NI for this period? Will your DP continue to pay his own tax for his self-employment, while declaring the other income? Has he seen what impact the second job will have on his tax rate? Do either of you get any benefits that may be affected?

Have you tried applying for a mortgage based on DP's self employment?

I'd be very cautious about proceeding, and I'd recommend speaking to someone who can give you qualified legal advice. This wouldn't rest easy with me, and I'd be concerned about possible repercussions.

RunnersWorld Sat 09-Feb-13 16:20:04

It's mad idea, you, your DP and his friend would all be guilty of mortgage fraud which is considered to be very serious and carries a prison sentence. More than 10 years in some cases here

Can you approach your existing mortgage company and explain the situation? i.e. that nothing is really changing. They may be more accommodating than you think.

houseworkallergy Sat 09-Feb-13 16:35:19

Thanks for posting, CajaDeLaMemoria.

You're right - it feels instinctively wrong because it is wrong (legally), even if it makes sense/seems reasonable in a way. I've said to DP that the mere fact I'm having to persuade myself to do it means something's amiss. Trust your gut and all that ...

With this arrangement, DP would pay tax on both the salaried and self-employed earnings, and we realise this would cost us a bit. The arrangement would need to last at least three months - three months' bank statements would be required, and a permanent employment contract and confirmation any probationary period has passed.

Our concern is that DP's self-employed work will now take him to the summer, and then even if he can find a job and start it straight after that, we'll be in the autumn before his probationary period would be over. That's cutting it a bit fine, with my ex wanting to be off the mortgage by the end of the year.

The mortgage lender won't factor self-employment earnings unless several years' steady earnings can be evidenced. I do some self-employed work in addition to my employed role, and these earnings don't count either.

This is so frustrating, because we're both earning and managing to pay all our outgoings (including the mortgage payment) comfortably.

Is there anything else we could we do (that would be fully above board) to enable us to take on the mortgage?

Thanks again for your advice.

houseworkallergy Sat 09-Feb-13 16:42:14

Thanks, RunnersWorld. Further sobering convincing not to proceed! I think we're just getting desperate ... hence the mad idea.

We've spoken to the mortgage lender, and they've said DP will need a new permanent job doing similar work to what he did before, and to be out of his probationary period. So that's that.

We can have up to four people on the mortgage, but unfortunately my parents aren't in a position to help, even temporarily. And involving others would be complicated in terms of wills, life insurance, etc.

I appreciate you letting me know what the potential repercussions could be. They're major, and reason to absolutely not proceed.

titchy Sat 09-Feb-13 17:55:41

You'd be effectively taking out a new mortgage in any case even if you went ahead so you'd be on their standard rte not your current deal

houseworkallergy Sat 09-Feb-13 18:01:37

You'd think so, titchy, but actually we wouldn't. That's already been discussed. It would be the same mortgage, with a change of title. I've already asked if we'd retain the current rate and they said yes.

Booyhoo Sat 09-Feb-13 18:14:25

why does DP need to go on the mortgage now? cant you just take exp off it and wait til DP is genuinely employed before putting him on it?

MrsHoarder Sat 09-Feb-13 18:21:01

Have you spoken to a mortgage advisor? If you can afford it then there may be a provide somewhere on the market that would accept you.

Might be worth looking elsewhere (certainly preferable to fraud)

RunnersWorld Sat 09-Feb-13 18:24:07

What normally happens after divorce- it can't be unusual for a mortgage to be taken on by one partner. Is it possible just to remove your Ex and have DP added later (if you want to)?

houseworkallergy Sat 09-Feb-13 18:58:12

We can't just remove my ex from the mortgage because I don't earn enough to retain the mortgage in my name only. The mortgage was taken out on the basis of two incomes, and needs two to sustain it. In typical separation situations, how does one parent normally manage this? Especially if they were the lower-earning parent.

Thanks for the suggestion though.

Booyhoo Sat 09-Feb-13 19:34:29

well in that case you'll have to re negotiatiate and take out a new mortgage based on just your income. it is unfair for you ex to be tied to the mortgage and unable to buy his own place just because your current partner isn't in FT employment.

CajaDeLaMemoria Sat 09-Feb-13 19:43:43

Unfortunately, it usually comes down to both people staying on the mortgage, or the house being sold and a cheaper mortgage found. It's sad, but that's the standard procedure in these cases.

There is limited options as things stand. A fraudulent job is a terrible idea, and as was shown upthread, has serious consequences.

How long has DP been self-employed for? Does he have contracts with minimum terms? Earn a semi-predictable income, as far as is possible for self-employment? It might be worth getting his accounts drawn up anyway to see if the mortgage company would accept them.

If not, it may well be a case of waiting until he can find a job that is acceptable, and your ex will have to stay on the mortgage until that's the case. It's unfortunate, but the alternative is selling the house.

There isn't another legal way around this.

Rockchick1984 Sat 09-Feb-13 22:39:25

Ask the bank what is the minimum amount he needs to earn from employment, and see if he can get a part time job to cover that amount? It may be less than you would expect, a weekend or evening bar job could be enough if you're not too far away from the income required.

LittleChimneyDroppings Sat 09-Feb-13 22:50:29

My friend took the mortgage on by herself when she split with dh. She rented a room and just about had enough to pay the mortgage. The bank gave her a chance (6 months) to try and do it by herself, although she never would have been given the mortgage in her own right when it was initially taken out. This was back in the days when banks were more generous with lending, so I dont know if that could happen now. You could ask though.

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