You’re on your way to becoming a property owner. Perhaps things have changed ever since you’ve taken that mortgage years back, and maybe you’re now married or living with your significant other. Luckily, you don’t have to bear the mortgage repayment burden alone as it is possible to add someone to a mortgage via a couple of main methods.
These involve either approaching your lender and adding a new name to the mortgage, or alternatively you could remortgage and create a joint mortgage account. Both options are plausible, but primarily depend on your situation. For for instance, if the partner you are wishing to add has a relatively low credit score, this can hinder your chances when approaching the lender.
Whatever your set of circumstances, stick around to learn more about how to add someone to your mortgage and what you should consider beforehand.
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Can You Add Someone To An Existing Mortgage?
You can add someone to your mortgage in a process called equity transfer. It can be a spouse, partner, family member, or close friend that can be added to your existing mortgage, but only with the agreement of the lender.
When adding a name with your lender, they’ll have to subject your potential mortgage partner to credit history and income checks to evaluate their eligibility. In addition, the lender will likely ensure your partner won’t hit the retirement age before the mortgage is paid off.
Methods To Add Someone To An Existing Mortgage
You can choose between two methods when adding your spouse, family member, or partner to your mortgage.
Method 1: Approach Your Lender
The first method you’ll want to try is to approach your lender and request an equity transfer. They’ll likely consider this since it involves mortgage repayments from two sources of income rather than one, which in theory should reduce the risk.
However, after evaluating your mortgage partner, your lender may not see them fit for approval, even if you’ve been a punctual borrower. Your partner may have a low credit score, no proper income source, or a history of unsuitable credit.
Besides that, adding someone to a mortgage involves a similar process to applying for a new mortgage. The lender will send you the application forms and other legal documents.
Keep in mind that the equity transfer will likely require some fees. You may need to involve a solicitor during the application process, and your lender might ask you for a processing fee for the request.
Method 2: Remortgage
If your lender denies your request, you can move on to the second method, remortgaging. You’ll be switching your current mortgage to a joint one. You can apply for a joint mortgage with your current lender or seek advice from a mortgage broker, like us here at When The Bank Says No.
We suggest using a whole-of-market broker that will have access to a wider scope of lenders than ones with a limited range. A broker will help you find an ideal lender for your particular circumstances. It’s the best course of action since the current lender may offer you a higher quote compared to other lenders in the industry. Luckily, we will help you through this.
A new mortgage means income and credit checks, property valuation, and the same mortgage application procedure all over again.
Now, entering a new mortgage and transferring your debts may not be possible if you’re in a fixed-term agreement. In this case, you’ll either have to rely on the first method and approach your lender, or wait until the fixed term concludes.
6 Steps To Add Someone To A Mortgage
If you’re still unsure where to begin when adding someone to your mortgage, check out our step-by-step guide below.
Step 1: Talk To Your Partner
The first thing you want to do is sit down with your potential mortgage partner and discuss all the possibilities. That way, you’ll be better prepared for any situation, whether it’s a denial from the lender to add a name or issues with paperwork on the legal side.
Step 2: Contact Your Solicitor
Speaking of legalities, you’ll want to arrange a meeting with your solicitor before making the decision. You can have two meetings with and without your potential mortgage partner. That way, you can discuss future plans if they become unstable, such as a split.
Besides that, the conveyancing solicitor will lay out what you should consider when completing the transfer of equity. That said, they can help you make decisions like whether you should opt for a joint tenancy or tenants-in-common agreement that’ll decide where property shares will go.
Step 3: Consider The Charges Involved
Aside from getting a legal angle, you’ll also want to consider the fees involved in adding someone to a mortgage. They can include the Early Repayment Charge (ERC), Stamp Duty tax, and registration fees.
That said, you can check how much ERC you’ll accumulate from the last mortgage statement or repayment you’ve completed. If it’s high, you might have to reconsider remortgaging, even if your current lender won’t add your partner’s name to the current mortgage.
Step 4: Contact Your Current Lender
Once you’ve settled the meeting with your solicitor and potential mortgage partner and considered all the fees, it’s time to approach the lender. Contact them and ask if it’s possible to add someone to the mortgage.
Inquire about the costs involved as well. Some lenders will provide you with a joint mortgage account for free, but it’s best to expect the opposite. If all goes well, your lender will give you the all-clear to add the name and send you the application documents.
Nonetheless, that still doesn’t confirm the addition. The lender still needs to assess your partner’s eligibility for the mortgage and they’ll need to go through their ID, credit, and income information before approval.
After approval, it’s official. Otherwise, you might not get the joint deal, since your partner’s credit score or income status doesn’t qualify for the mortgage. In turn, move to the next step.
Step 5: Find A Mortgage Broker
Now, if the ERC payments are too much or your lender denied your request, you can find a mortgage broker. They’ll navigate through the mortgage market to find you the best lender for your circumstances.
The broker will help you decide which decision is more cost-effective. In some cases, they might tell you to pay the ERC instead of remortgaging. It’s all case-by-case.
Step 6: Complete The Legal Work
After reaching an agreement, your solicitor will handle the legal aspects. They’ll help you go through whichever deal you’ve decided, such as a joint tenant or tenants-in-common situation. Plus, they’ll oversee the property ownership based on your decision.
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What To Consider Before Adding Someone To Your Existing Mortgage
Before going through with adding someone to your mortgage, you’ll need to consider a few factors, such as the ERC and association of credit.
Early Repayment Charges (ERC)
The ERC is a critical factor worth considering before choosing a method of adding someone to your mortgage. Borrowers are subject to the ERC when they exit their mortgage early.
If you pay off more than what was agreed upon, your lender will lose future interest rate payments. To make up for that, the ERC comes to play.
The charge can range between 1% to 5% of the amount you still need to pay off. The percentage is ultimately up to the lender and how long you’ve been with them.
The earlier you attempt to exit the mortgage from the current lender, the higher you can expect the ERC. In turn, if you’re still early in the mortgage, you’ll want to opt for the first method and consult your lender about adding someone to the deal.
Meanwhile, if you’re nearing the end of the fixed term, it might be worth getting a broker to search elsewhere for a better plan.
Credit Association
If you’re remortgaging to a joint deal, you’ll have to consider the association of credit. An association of credit connects you and your partners’ credit score.
Mortgage lenders typically use your credit report to assess your eligibility for a loan. The lower your score is, the more lenders will have to think before entrusting you with a large sum.
Your financial history will pop up when lenders decide to peruse your credit reports. That means if you or your partner’s credit score is low, it could influence your future remortgaging and borrowing opportunities with a mortgage provider.
Legal Implications
Besides sharing a mortgage, you and your partner also have to consider the legal implications of property ownership. In turn, a conveyancing solicitor is best to have in these situations to guide you through the transfer of equity.
Legal work is critical when adding someone to your property deeds, especially in cases of inheritance and separation. That said, it’ll carry tax implications and necessary paperwork. Fortunately, your solicitor can handle the latter.
They’ll go to the HM Land Registry, a government sector responsible for land ownership registration in England and Wales. There, the solicitor will obtain a copy of the property title, add a name, then draft a “Transfer Deed.” You and your partner will need to sign the deed with a witness present.
Now, if you’re not married to the mortgage partner, you’ll need to have some sort of protection or backup plan. In turn, your solicitor will likely create a deed of trust detailing how much property equity each party owns.
To take it to the next level, you can create a cohabitation agreement that entails what would happen to your finances and property if you split, get ill, or die. With that in mind, you’ll want to keep your wills updated after completing an agreement.
Charges
Whether you’re adding your partner’s name to your mortgage or remortgaging for a new joint deal, your lender will likely incur administrative fees. Additionally, you’ll have to consider the legal fees involved when hiring a solicitor, adding a name to your property title, and creating a transfer deed.
You might also have to pay a Stamp Duty tax, which comes when purchasing a property. In some scenarios, you might not have to pay the tax, particularly if you’re only adding your partner’s name to your mortgage.
Nevertheless, other situations will call for it, such as giving your partner more share of the property than yours or if they’re paying you back for half the previous monthly mortgage payments and calling it financially even. Either way, your solicitor will advise you on whether you’ll pay it or not.
Relationship Status
As a married couple or if you’re in a civil relationship, remortgaging for a joint offer won’t make much of a difference in terms of ownership. Both of you will already legally have a claim of the property.
If you die, your partner will get the property, regardless of their mortgage circumstances. Nonetheless, you’ll want to ensure that you have life insurance to cover the mortgage, especially if your partner can’t afford to pay the rest of it off.
In circumstances where you’re not married to your potential mortgage partner, your decision might differ. If you want the partner to jointly own the property, they need to be added to the mortgage as well since there’s no legal connection between you both.
Before jumping to a joint mortgage, you’ll need to think it over. You’ve built equity over the years for this property. If you or your partner decide to split, they’ll get half the property value you’ve put so much effort into earning. Luckily, you can opt for a tenants-in-common agreement that’ll offer you a more secure deal that doesn’t resort to an unfair 50/50 split.
Tenants-in-Common vs. Joint Tenancy
When jointly owning a property, you can do so in two different ways. It can be a “tenants-in-common” or “joint tenancy” agreement.
Tenants-In-Common
A tenants-in-common situation occurs when each of you owns a percentage of the house. In this case, you can pass down the house to your children if either of you passes away. The option is perfect if your future is unstable and you need further protection. To recap:
- Ownership is fluid, one partner can get more property share than the other and vice versa.
- When selling the property, each party gets the agreed-upon equity from the ownership percentage.
- In case of death, your property share can be passed to your children, or whoever you choose in your will.
Joint Tenants
Another option would be a joint tenant agreement. You and your partner would have equal rights over the property. If you split, die, or get sick, the other person gets the house. It’s the most popular option, and better if you’re in a civil relationship or married. To recap:
- Ownership is 100% shared.
- If you’re selling the property, each of you gets half of the profits.
- When one of you dies, the other will receive full possession of the house, even if it’s not stated in your will.
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Mortgage FAQs
What are the tax implications of adding someone to a deed?
Transferring equity doesn’t incur a tax if you’re passing the deed to a spouse, charity, or civil partner. Meanwhile, if you’re transferring it to another person, even if it’s your child or another family member, you’ll likely face capital gains tax (CGT).
How long does it take to change the name on the title deeds?
Updating the register and adding a name to your property title can take anywhere between three weeks to three months.
Does it matter whose name is on the mortgage in a divorce?
No, it doesn’t. Even if your spouse’s name isn’t on the mortgage, that doesn’t mean you’ll get the property. It primarily relies on a court order. Some orders will allow you to live in the house, despite being owned by your spouse, especially if there are children under 18 are living in the house as well.
Add Someone To A Mortgage Summary
Can you add someone to a mortgage? In short, yes, you can. The process can go in two distinct directions. You’ll first have to contact your existing mortgage lender and ask for approval. They’ll need to subject your partner to the usual credit and affordability checks.
If their details check out, your lender will give you the joint account. Nonetheless, if not, then you’ll have to consider remortgaging or getting a new joint mortgage. You can stick to your existing lender or find another deal with an experienced broker who will help consider factors like any ERC costs, your relationship status, and the association of credit.
Aside from that, adding someone to the mortgage is a critical decision. Don’t forget to take your time, especially in remortgaging and property ownership choices.