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?

My house is solely in my name, I’m the only person on the title deeds. I have a mortgage through Barclays in mine and exH name as I couldn’t raise it myself. They’re not easy mortgages to find and exH had to seek legal advice as a condition before the mortgage was taken out but it is possible.

God no, don't save for years and then extend if you don't need to and can just take out a small mortgage, that's pointless. Your children will get their own bedroom just as they're about to leave for university and what is the point in that? You should try to get maximum years of use and enjoyment out of the extension and that means doing a mortgage now whilst rate are cheap. Do a 5 year fixed deal. You can easily afford 300 pounds a month on your salary alone (it should come out of your salary, as it's only your house).

Or you could agree to own as tenants in common, with different proportions owned. Also make wills.

I'm not sure exactly, so worth speaking to a bank or lender to see but surely you could maybe raise the money, even on a low wage as if you default then they can take the house. As it is worth so much, they will be able to get their money back no problem? So no need to add your partner to the property etc.

Fwiw, I would definitely do this. If you can afford the £300 a month then worth taking the mortgage. If you take it out on a short fixed term period, 3 years or so, then you could save alongside making the repayments and perhaps pay a large chunk in at the end of the 3 years before re-mortgaging again and then you pay it off quicker. But life is for living. So don't wait!

Does your partner realise he will leave with nothing if you split up?

@frgh

An IFA who says

"Therefore if OPs parents gave her the house as a gift, they made no profit hence no CGT applies."

😆😆😆 Feel free to quote my inaccuracies....

Ok, I will point our your inaccuracies I never said that, it was said by @EinsteinaGogo at 14.43.

I wouldn't call that an inaccuracy, I'd call that a huge blunder

Feel free to apologise.

Feel free to apologise.

You’ll have a long wait for that. It’s more likely you’ll be told to pipe down. 😂

You need to speak to an advisor because, whatever mortgage/loan you get would be in your name only. The house bring unencumbered helps but you need professional advice.

@Blossomtoes

Feel free to apologise.

You’ll have a long wait for that. It’s more likely you’ll be told to pipe down. 😂

I doubt she'll come back because she's definitely not wrong and she was always referring to IHT and just said CGT to throw me off the trail!

How realistic is saving the money and doing it that way?

Get detailed quotes for the work first. It will cost more than you will think! Get a long fixed rate.
But it sounds a good idea, especially if you get a good rate. You get the house you want at the time you need it.

@yoyo1234

How realistic is saving the money and doing it that way?

Pointless because you get fewer years of use, and the years you lose are the ones which are most beneficial.

The extra "cost" (a pittance in interest) of doing it now is negligible, whereas the benefits of doing it now are enormous.

In all probability the need to pay CGT may have arisen when the parents gave the property to OP. It will depend on the value they acquired it for, the value when they made the gift and whether the amount was over their CG allowances. If any CGT was payable it would be payable by the parents and NOT OP. In situations where parents can afford to give such a gift they can invariably afford to pay the tax due too.

Thus there needs to be no discussion surrounding CGT within the context of how and whether OP should take out a mortgage.

The advice remains the same - see a decent broker who will be able to assist.

My DD has just got £40k. She only needed to earn £12k a year. The house is only worth £90k. If that's any help. Speak to a broker and see what your options are.

A mortgage is the cheapest money you will get and you will get an immediate benefit. Do it and leave out DP.

I do love mumsnet, if this poster had said that she was unmarried and her partner had been left the house they lived in but it wasn't in her name everyone would be shouting "you need to be put on the deeds, you need security" but as it's the woman here who owns she needs to "protect your asset, don't put him on the deeds" etc. You have 3 children together yet don't own your home together, what would happen if you died? Would your partner lose his home? I find it odd you are committed enough to have 3 children together but not enough to get married and share assets.

Like others have pointed out you can't just stick someone on a mortgage so you can borrow more, they actually have to own the property. Either add him onto the deeds or just take out a joint loan not secured against your home.

OP: you need to talk to a solicitor about how you protect your ownership of the house, whilst also giving your DP a fair stake in his contribution to the cost of the extension.

To put a stop to the tax bicker: could you clarify whether your parents gave you an actual house, and if so whether it was their main residence or another property, or whether they have you the ££ to buy the house.

Thank you!

@HomeHomeInTheRange

OP: you need to talk to a solicitor about how you protect your ownership of the house, whilst also giving your DP a fair stake in his contribution to the cost of the extension.

To put a stop to the tax bicker: could you clarify whether your parents gave you an actual house, and if so whether it was their main residence or another property, or whether they have you the ££ to buy the house.

Thank you!

It's irrelevant, it's not OPs question!

Can everyone give over about the IHT vs CGT! It's impossible to read the thread.

I don't understand why your partner would want to be tied to the debt anyway if he doesn't own the house, why would he pay for a loan to extend it? You could literally just kick him out when you've paid it off and he'd be left with nothing.

Why wouldn’t the op be able to get a £55k mortgage on a £13k wage?
I managed to get a £55k mortgage back in 2006 on a £14k wage on a house I bought for £75k.

Can’t imagine there’s any risk to the lender lending £55k on a property worth £550k 🤷🏻‍♀️

I managed to get a £55k mortgage back in 2006 on a £14k wage on a house I bought for £75k

Well quite a lot has changed since 2006 in the mortgage market post the 2007 crash. Lenders are a lot more cautious now.

In 2006, you could self certify, get 125% mortgages, 5/6/7x salary, interest only mortgages with no repayment vehicle and all manner of other products that are not available today.

The OP may be able to get a relatively high multiple mortgage on a low salary, but she may need a broker to find one. From their point of view, she could end up as a single parent of 3 if she separates from her DP and as a homeowner, won't get help with housing costs, so won't be able to afford even a modest mortgage.

Yes they'll get their money back if they repossess, but it will take months to do so and legal costs that will be a significant proportion of the sum borrowed.

You'll get a mortgage no problem for £55k on £13k a year with that loan to value rate.

I've done it - took out a repayment mortgage on a house I owned which was mortgage free. It enabled me to do the home improvements I wanted to at the time. Mortgage rates are low at present in historical terms but affordability criteria are quite tight. But you could use a good lump sum of your savings to keep down the amount borrowed and help with affordability.

Another option for you to consider is the length of mortgage term and that is more flexible than it used to be. Subject to your age, you can get mortgages for more than 25 years if you want a lower monthly repayment sum.

Age comes into it because most mortgages have an upper age limit by which they must be repaid, of usually around 70 or 75 or by retirement but there are a few available up to 80 - subject to detailed scrutiny and assessment of personal circumstances.