Mortgaging our owned home

[Missmummy88]

Any downsides I should be aware of putting a mortgage on our owned home? Current value about £550000 - fully owned by me ( gift from parents) with a long term partner 13 years & 3 kids and very happy. We want to get a small mortgage to add a 4th bedroom and new kitchen & redesign downstairs. This will allow each child to have their own room & make the house more liveable ( currently layout is awkward with kitchen & living area opposite ends of house having to walk betweeen 3 rooms. We want to do this now rather than when kids are older (hence mortgage rather than Saving) we both have jobs and currently save my wage & spend dh (although I work part time so circa 13,000 a year saved)

Is there anything I should be aware of? Any precautions I should take?

Worst case scenario, you could lose your house. Better to get an unsecured loan and pay, say £320 per month.

@hellithurt I assumed the property was owned by the parents & they were still alive so it was a second property

Get good broker/legal advice and keep the asset in your name.

You don’t say how much you hope to borrow, or for how long, just the £300/month payment.

If you save all of your income of £13,000/year or £1,083/month, how long would it take you to save for this?

If you were married, and/or owned your home jointly with your partner, I would say the trade off is worth it and get the mortgage. But it sounds like in order to get it you would have to give away some of your ownership of the property, and that is to higher price to pay for what you propose. You need to keep that asset.

[quote frgh]@hellithurt I assumed the property was owned by the parents & they were still alive so it was a second property [/quote]
Don’t assume. Read the OP properly, it’s always helpful.

There's no way I would personally take on a mortgage (if I didn't need to) at the moment. The economy may be in for a stern shock and I would want the least financial commitment/greatest financial resilience on my side.

But I hate risk, so...

See a broker. Despite what you are being told above with the amount of equity to loan value you probably would be able to get a mortgage in your own name on the property.

They may suggest an interest only one which then you could make capital payments against using your oh's income .

But I suspect it is possible even without adding OH to the deeds. If he is your DH then there is no reason not to add him as a joint owner.

other than if you want to leave it after you die to someone other than him

Pipe down @Blossomtoes, I asked a question. The OP said gifted not inherited hence why I thought the parents were still alive.

Honestly you're as infamous as that other poster, do you not have anything else to do in your life?

Have you considered selling and buying a slightly cheaper property to give you some cash to do whatever work you might want?

Lots of people on Mumsnet are very mortgage adverse. But mortgages are often the cheapest loan you can get. I may be biased though as we’re about to extend our mortgage to do the same thing. And saving what we need will mean DC will have grown up and gone before we do the work we need.

Speak to a broker - a good one won’t charge you for advice - and see what you can borrow both with and without your DP involved.

If you do go ahead with the mortgage make sure you are paying the mortgage payments from your income. If your dp pays them it will give him a claim on the property

@Blossomtoes Don’t assume. Read the OP properly, it’s always helpful.

I read the OP and also assumed the parents are/were still alive as it was described as a 'gift' not an inheritance. Am I missing something?

@Mybestyear exactly

Your partner cannot go on the mortgage without a risky set up because he would be tied to the debt and yet never entitled to own the asset which he is paying the debt on. This is considered unethical for a lender to set it up this way and a mortgage lender would find repossession difficult to enforce because they allowed him to sign up to it.
So you will find that in order for him to be on the mortgage and have his earning included then you’ll have to add him as a joint owner of the asset which is obviously risky for you.

@frgh

Good question! How did they avoid CGT?

[quote callmebymyname1]@frgh

Good question! How did they avoid CGT?[/quote]
What makes you think they did? And it's got nothing to do with the thread!

OP says the house is "fully owned by me (gift from parents)"

I took this to mean she was gifted the entire sum required to purchase it and thus never needed a mortgage. Hence no CGT

I took out a mortgage on a home I owned outright it wasn't difficult as loan to value ratio was low. My mortgage was for roughly four times my gross salary at the time. I'm sure they also took into account child maintenance as income. Perhaps they'd be willing to include some of your partners income if you agreed what he paid to the household as rent / covering costs of children.

See a decent mortgage advisor and they will tell you what you can / cannot do.

[quote callmebymyname1]@frgh

Good question! How did they avoid CGT?[/quote]
Who avoid CGT?

Do you actually know what CGT is?

What makes you think they did? And it's got nothing to do with the thread!

Well I though in the context of borrowing a lot of money vs salary it would be prudent to make sure everything was accounted for or at least I would. But you are right that the parents may have paid it already but most people need to sell the asset to raise those funds.

If I was in your DP's position I would not take on the burden of a mortgage without being getting some kind of (part) ownership of the property.

HI OP,

I can see that making the house bigger would be desirable for you.

Have you costed the extension?

You may well be looking upward of £100k-£150k if your house is in the £550k range right now.

Materials and costs have increased a lot so make sure you do borrow enough to do the work, if you choose to go that route.l

@frgh

What makes you think they did? And it's got nothing to do with the thread!

Well I though in the context of borrowing a lot of money vs salary it would be prudent to make sure everything was accounted for or at least I would. But you are right that the parents may have paid it already but most people need to sell the asset to raise those funds.

You have no clue what you're taking about!

Why would anyone pay CGT in this scenario?

@hellithurt yes I paid it last year when I sold an additional property.