In this article, we explain the process of adding another person to your existing mortgage. We’ll cover the legal procedures involved, potential costs to be aware of, and alternatives you could consider if adding someone to your mortgage does not suit your needs.
Can you add someone to a mortgage?
The short answer is yes. You can add another person to the mortgage on your home either with your current mortgage lender or when you refinance your mortgage with a new provider.
While it may seem complicated, the process can actually be fairly straightforward when you work with knowledgeable professionals who guide you every step of the way.
How to add someone to your mortgage?
Adding someone to your mortgage involves more than just putting their name on the mortgage. You’ll need to fill out various forms so the lender can review the other person’s details against the requirements of the mortgage.
The legal process of adding another person or taking someone off a mortgage is called a transfer of equity (TOE). There are two main ways to do it:
Adding someone to your existing mortgage
If you add someone to your current mortgage, you must contact your current lender to arrange it.
The lender will then take the other person through a process similar to a new application. This includes checking their income and credit to ensure they can make the payments.
Having two borrowers is often better for the lender. But even if you’ve never missed a payment, they aren’t required to add someone who doesn’t meet their criteria.
You may need a solicitor to add the new name to the property deed. There could be additional fees for this.
Apply for a joint mortgage
The other option is getting a joint mortgage with your current or new lender.
This is like applying fresh – the lender will value the property and assess both your income, credit, and ability to repay.
Before remortgaging, speaking to a whole-of-market broker can ensure the best deal for your situation. They can compare lenders and even assist with the application.
How can adding someone to an existing mortgage loan affect you?
Adding someone to your mortgage may seem helpful, but there are some notable downsides.
The main issue is around your original deposit. When you add a person, you automatically give them the right to a percentage of the property value.
In most cases, this will be a 50/50 split. So, if you purchased the home alone and later added a partner, you’d be handing over half the property’s worth- even though you put down the entire deposit.
For example, say your deposit was 10% of the property’s value at £20,000. By adding the other person to the mortgage, you instantly lose £10,000 in equity that you invested.
Having another contributor can make the ongoing repayments easier. However, adding someone also leaves you vulnerable financially if you separate or sell the house.
In summary, sharing costs is a plus, but you risk losing equity or money you originally put down. Carefully consider if it’s the right move before adding another person to the mortgage.
What to think about before adding a person to your mortgage?
Adding someone to your mortgage is a big commitment with a variety of factors to consider.
If you’re married or in a civil partnership, you don’t need to add your partner – you both automatically have a claim to the property.
If you’re unmarried and want to own the property together, adding them to the mortgage is necessary. But if you purchased the house alone before meeting them, you may want to protect your equity in case you separate.
You can add your partner to the mortgage but define each person’s share with tenants in a common arrangement instead of the usual 50/50 split.
Getting legal advice beforehand is essential to understand tax, inheritance, and separation implications.
A solicitor can add a name to the title deeds and help prepare documents to protect your equity if you’re not married- like a deed of trust.
Your partner’s credit score becomes linked to yours with a joint mortgage. If their credit score is poor, it could reflect badly and make borrowing significantly harder down the line when looking to remortgage.
When considering adding your partner to your mortgage, speaking to an expert mortgage broker can help weigh the pros and cons for you. Submitting a new mortgage application also allows the lender to check both of your credit scores and repayment ability. But sharing ownership via the title deed could put your original equity at risk if the relationship ends. Think carefully before and speak to an expert before taking that leap.
Can you remove someone from your mortgage?
It’s common for people to want to remove an ex-partner from their mortgage after a split. There are two options to take them off:
Approach your lender
You can ask your lender to release the other person from the mortgage. But they rarely agree as it gets them out of an obligation to repay the loan.
In very rare cases, the lender may help with this.
Remortgage in your name
The other way is remortgaging in just your name. However, this has some potential issues:
- The affordability was first calculated based on two incomes. You’ll now need to qualify on your income alone.
- You may need enough equity in the property to cover a new deposit, plus funds to repay your ex’s share.
- With flat house prices, you could end up with negative equity or need to put down more money.
Taking someone off a mortgage is challenging. Speaking with a mortgage broker can help you understand if it’s feasible or if other options exist in your situation.
FAQs on adding someone to an existing mortgage
Can I add my spouse to my mortgage?
Yes, you can add your spouse to your mortgage. Many people wish to add their spouse to their mortgage with a major life change, most commonly marriage. If you and your spouse are living together and are sharing the rest of your expenses, why shouldn’t you bear the legal and financial responsibilities of homeownership together?
What is a transfer of equity (TOE)?
The TOE is a process that allows you to add someone to your mortgage. It can be a spouse, partner, family member, or close friend. Either way, you’ll want to ask your lender to add them to your existing mortgage.
What documents do I need to add someone to my mortgage
Typical documents needed are:
> Proof of address.
> 3 months’ payslips and bank statements.
> A completed application form.
> A signed agreement defining shares if not 50/50.
Will adding someone to my mortgage affect my interest rate?
Adding another borrower can sometimes get you a better mortgage rate, as two incomes make it a lower risk for the lender. But it depends on the new person’s credit score and affordability. An adverse credit history could negatively impact the rate offered.
Getting broker advice when adding someone to your existing
Adding or removing someone from your mortgage depends a lot on your specific situation. A broker can figure out the best approach.
A whole-of-market mortgage broker looks across lenders to find you the right deal. They offer free, unbiased advice on the options for your circumstances.
This could make all the difference between success or failure when trying to add or take Someone off your mortgage.
Key things a broker can assist with:
- Assessing if your lender will allow adding/removing the person.
- Checking affordability based on income(s) and outgoings.
- Finding a better rate if needing to remortgage.
- Recommending solutions to protect equity if you’re adding a partner.
Our expertise can simplify the process and help achieve the ideal outcome. If considering updates to your mortgage, speaking to an expert broker earlier on in the process provides useful guidance.