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A Guide to transferring Mortgages

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By Pete Mugleston   Mortgage Advisor

Last updated: 25th September 2018

How to transfer a mortgage to another person

Introduction

The end of a relationship can be a stressful time, particularly if you share a financial commitment, like a mortgage. Similarly, money matters can prove a headache at the beginning of a relationship as a couple begin to combine their finances. We often receive enquiries from people who want to add a partner to the mortgage or remove a name from a joint mortgage.

The good news is that transferring a mortgage from one person to another is usually possible and, with the help of a professional mortgage advisor, the process can be straight forward, which means you can also transfer a mortgage to a family member in the UK.

In this article we'll cover:

Transferring mortgages to somebody else

Transferring a mortgage to another person requires a process known as a Transfer of Equity, which can be applied to an existing mortgage or as part of a remortgage, and is commonly used in the following circumstances:

  • Adding a partner to a mortgage, switching from a single mortgage to a joint mortgage
  • Removing a partner from a mortgage, switching from a joint mortgage to a single mortgage
  • Taking a partner off a mortgage and adding a new partner to the mortgage deeds

A Transfer of Equity can also be used by people who want to transfer a mortgage to a family member, often where a parent chooses to add a child to the deeds of a property. This also applies when transferring a joint mortgage to one person, such as a couple who need only one name on the mortgage or a family mortgage transfer.

In this article we cover the different scenarios where you may want to transfer a mortgage to another person, with information on the options and what you need to think about. There are a number of factors that will impact your choice, including:

  • Equity
  • Affordability
  • Credit history
  • Property types
  • Personal circumstances
  • Other factors

If you would like to talk to someone about your individual situation, we work with specialist mortgage advisors who are able to guide you through the available options for your circumstances, so you can have a smooth the transition when you transfer your mortgage to another person.

Can I add my partner to my mortgage?

We’re often asked, can I add my husband to my mortgage, or in the case of the husband, should I add my wife to my mortgage?

Yes, it is possible to add someone to a mortgage if you are moving in with a partner who already has a mortgage or would like to add a partner to your existing mortgage.

Be aware however, that while adding your spouse to your mortgage can be a sensible move, especially where children are involved, your partner will be subject to the usual income and credit checks and may be subject to stamp duty.

How do I add my partner to my mortgage?

Adding a partner to the mortgage deeds is a change of legal ownership of the property and will require a Transfer of Equity. It is possible to apply for a Transfer of Equity if you are in a current mortgage deal, or you could apply to add a partner to a mortgage as part of a remortgage.

Whether you choose to remain in the existing mortgage and apply for a Transfer of Equity or to opt for a remortgage, will depend on your circumstances and whether there are Early Repayment Charges payable on the current deal.

The process of adding a partner to the mortgage involves an affordability assessment and a credit check as you will both be jointly responsible for the mortgage. But don’t worry if either of you has bad credit as there are plenty of options available. We provide more information on affordability and credit history later in this article.

How to buy your partner out of a mortgage

If you and your partner are splitting up, you may want to take their name off the joint mortgage.

Removing an ex-partner from the mortgage and deeds is possible with a Transfer of Equity if you meet the lender’s criteria. These criteria can vary between lenders and an expert advisor can identify the right lender for your circumstances.

What happens to a joint mortgage when you divorce is the same for a joint mortgage separation if you are not married – as a couple you are both jointly responsible for the mortgage payments and you should both ensure that the payments are made, unless you are advised to do otherwise.

How do I buy my partner out of our mortgage?

When it comes to buying a partner out of a mortgage, affordability is often a big consideration as you many need to raise extra money to pay for your partner’s share of the property.  You will also need to demonstrate you can afford a mortgage that was previously paid by two people.

If you’re wondering how to buy out your partner on a mortgage in the UK, the good news is that there are lots of lenders that have different ways of working out how much you can afford to borrow and there are plenty of options if you are a contractor, self-employed or would like to use more than one source of income.

Take a look at the affordability section later in this article for more information on how the choice of lender can make a big difference to how much you can borrow.

If you are thinking of buying an ex-partner out of a mortgage but decide that you no longer want to live in the house or flat, it is possible to retain ownership of the property and let it out to tenants using a Buy to Let mortgage.

You can remortgage a let to buy mortgage and could raise extra money to help towards a new home. Affordability on a buy to let mortgage is primarily based on the rental income that can be achieved by the property and, although it can differ between lenders, if you are a basic rate taxpayer, the rental income will ordinarily need to cover at least 125% of the mortgage, assuming the mortgage is charged at 5.5%. For higher rate taxpayers, this increases to 145% or 160%, to reflect the fact they will face bigger tax bills as a result of landlord tax changes that are being introduced.

There are lenders that have introduced alternatives for landlords who have extra income to support a property that does not meet these rental requirements. This is known as top-slicing and more details are available later on in the buy-to-let affordability section of this article.

It is worth noting when you are removing an ex from the mortgage that generally, the person being removed from the mortgage cannot continue to live in the property. This means that if you want to remove your wife from the mortgage, your ex-partner will need to find somewhere else to live and may be looking for mortgage advice of their own. This article covers some of the considerations when taking a mortgage and we work with expert mortgage advisors who can provide joint mortgage separation advice.

How to remove an ex from the mortgage without refinancing

You do not need to remortgage to remove an ex from the mortgage as it is possible to do a Transfer of Equity on your existing product and many lenders also allow capital raising on a Transfer of Equity.

As part of this process of transferring a mortgage into a sole name, a lender will carry out affordability and credit checks and there will be administration and legal fees to pay. For this reason, many people use buying out a mortgage from a partner as an opportunity to review their mortgage and often choose to refinance, particularly if there are Early Repayment Charges payable on their current deal.

Does my ex have to pay half the mortgage?

If you are both named on the mortgage and your ex partner is refusing to pay the mortgage, you are still both responsible for making repayments and any late or missing payments could affect your credit rating. This could make it harder to get a mortgage in the future, but not impossible. Take a look at the section on bad credit mortgages later in this article for more information.

What happens if one partner stops paying the mortgage?

If your ex-partner is not paying the mortgage, and you’re thinking can I sue my ex for not paying the mortgage? You may need to seek independent legal advice.

Removing a borrower and adding a new borrower to a joint mortgage

It is possible to remove a name from a joint mortgage and add a new wife, husband or partner to the mortgage as part of the same Transfer of Equity.

Adding a joint borrower can help with affordability if your partner has an income, which can be particularly useful if you want to raise money to buy a partner out of the mortgage.

When you are transferring a mortgage to another person it is a good idea for all parties involved to seek professional advice so that you all have an understanding of your joint mortgage separation rights and responsibilities.

Joint mortgage after separation

When it comes to a joint mortgage split-up or a joint mortgage divorce, you have a number of options open to you and these include:

  • Selling the home and both moving out
  • Have one buy the other partner out
  • Keep the home and rent it out

If it’s a joint mortgage and you’re splitting up with children, then the options might be:

  • Keep the home and not change ownership (one partner would live in it until the children are of a certain age.)
  • One partner would transfer part of the value of the property, that partner would retain a stake in the property and receive a percentage when it is sold.

Other circumstances

Selling and buying property

If you have a joint mortgage now and are splitting up with your partner, you may decide that you want to sell the property to divide the equity that you can then use towards a new home.

The good news is that there are lots of mortgage options for customers with a variety of circumstances and, even if you or your partner missed some payments during the process of the separation it is possible to borrow up to 90% loan to value, or even more, with some lenders.

We cover some of the considerations in taking a new mortgage later in this article.

Transferring a mortgage to a family member

We are often asked about transferring a property to a family member and it is possible, for example, for parents to add children to the mortgage and deeds using a Transfer of Equity. This can be used as part of inheritance tax planning, but it is always important to seek professional tax advice before transferring a mortgage to a family member for tax reasons.

We are sometimes asked whether it is possible to gift a property to a family member, and it is, but if there is an outstanding mortgage on the property, this will need to be repaid before the property changes ownership or as part of the transaction.

What happens to mortgage debt if you or your partner dies?

If you take a joint mortgage with your partner, you are ‘jointly and severally’ liable for maintaining the repayments. This means that payments still need to be paid on a joint mortgage in the terrible event that one partner dies.

Regardless of any will, the home is not automatically transferred when somebody passes if there is currently a mortgage on the property. This is why it is so important to have a life insurance policy in place that would pay a sum which could clear the mortgage, or at least reduce the balance.

If there is an outstanding mortgage on the property you may need to transfer the mortgage from joint to single and the lender will carry out affordability and credit checks.

For older borrowers, the good news is that there are now many lenders that are able to lend to customers up to and into their retirement. We work with specialist advisors who would be able to help you identify the right mortgage for your circumstances.

Removing a name from joint mortgage

Whether it’s through divorce, death or a change in your personal circumstances, when it comes to removing your name from a joint mortgage in the UK, you’ll need to complete a transfer deed.

In the case of being separated, you will still both be liable for the loan, so simply walking away from a joint mortgage is not really feasible.

So how can I get my name taken off a joint mortgage in the UK?

There are a number of ways of getting out of a joint mortgage:

  • Ask your partner to buy you out
  • Sell the property and split the proceeds (if any)
  • Ask your partner if they would agree to taking over the joint mortgage
  • If your partner agrees, you can sell your share to a third party
  • Contact your lender and ask if they will remove you from the mortgage (your partner would need to demonstrate that they could service the loan)

As always, it’s essential to seek quality legal advice if you’re looking at removing a name from a joint mortgage in the UK.

Moving from personal name into limited company

We are increasingly contacted by customers who have a buy to let property that they would like to move from their personal name into a limited company as a way of managing their tax liability.

It is possible to move a property from a personal name into a limited company, and vice versa, and a growing number of buy to let lenders now offer limited company mortgages.

As the property will be owned by another legal entity it will effectively need to be purchased by that entity and will be liable for Stamp Duty.

The exception to this would be for professional landlords with a larger property portfolio, who are able to prove they work more than a certain number of hours per week – in this instance the tax man may grant approval for transfer without the need for stamp duty to be paid by the Ltd company.

If you are thinking of moving a buy to let property from a personal name into a limited company, it is worth seeking professional tax advice. If you are advised that it is the right choice for you, we work with specialist mortgage advisors who can identify the best limited company mortgage for your needs.

Things to think about

Whether you are transferring a joint mortgage to one person, adding a husband or wife to your mortgage, or buying your partner out of a mortgage, here are some of the things you need to think about.

Stamp Duty

Stamp Duty Land Tax is payable of the transfer of ownership of land or property and so if you are transferring a mortgage to a partner or family member, or removing an ex-partner from the mortgage you may have to pay Stamp Duty, depending on type of transfer, your marital status and other factors.
Here’s how it works:

  • You might have to pay Stamp Duty if you transfer a share of the property to husband, wife or partner when you marry, enter into a civil partnership or move in together and the share of the property that your partner receives exceeds the Stamp Duty Land Tax threshold.
  • You don’t pay Stamp Duty if you transfer a share of property to your partner as part of an agreement or court order if you are divorcing, dissolving a civil partnership, annulling a marriage or legally separating.
  • However, if joint owners are unmarried and not in a civil partnership when they transfer an interest in the property from one owner to another, they may have to pay Stamp Duty.

More details on Stamp Duty Land Tax are available here.

Equity

One factor that impacts your options when you are transferring a mortgage to another person is the level of equity in the property, which is calculated by subtracting the value of the mortgage balance from the value of the property.

You may want to raise funds to buy a partner out of the mortgage or use towards an onwards purchase and there are currently many mortgages that enable you to borrow up to 95% the value of the property.

The size of the mortgage compared to the value of the property is known as loan to value, or LTV and will have more options and should be able to secure a lower rate if you want a mortgage with a lower LTV.

Hypothetical example

Your property is worth £200,000 and the current mortgage balance is £100,000. This means that your mortgage is 50% of the value of the home, or 50% LTV.

If you were to remortgage to buy out a partner and increase your loan to 95% LTV, you could borrow up to £190,000, which could provide £90,000 to provide money to your ex-partner and pay for other costs.

It is worth noting that there are other factors that can impact the maximum LTV you are able to borrow, including age and credit history.

Affordability

If you are transferring a mortgage from one person to another, you need to demonstrate that you are able to maintain payments on the mortgage and so a lender will work how much it thinks you can afford to borrow, which is known as your affordability.

Affordability can be a particular concern if you are taking a name off a joint mortgage and need to demonstrate that one person can now afford the payments previously made by two.

Lenders calculate affordability based on how much you earn and how much you spend, and each lender will have a different way of using your income and outgoings to work out your affordability.

In general, a lender might look at lending up to 3x or 4x your income but there are some lenders that can advance up to 6x income or even more. If you need to raise extra money to buy someone out of a joint mortgage you may consider a secured loan as some secured loan lenders are able to lend more than 10x income.

Increasingly, borrowers want to use additional sources of income, such as bonus, overtime or investment income towards affordability and some lenders will use 100% of additional income sources in the affordability calculations, and this can make a big difference to how much you could borrow.

Hypothetical example

Your basic salary is £30,000, but you earn an annual bonus of £10,000.  Here’s what different lenders might be able to lend to you:

  • Lender 1 considers 50% of your bonus and lends up to 4x income
    £10,000 x 50% = £5,00
    £30,000 + £5,000 = £35,000
    £35,000 x 4 = £140,000 max loan
  • Lender 2 considers 100% of your bonus and lends up to 5x income
    £10,000 x 100% = £10,000
    £30,000 + £10,000 = £40,000
    £40,000 x 5 = £200,000 max loan

In this hypothetical example, there are no changes to your circumstances, but one lender may lend up to £200,000 and another may only able to advance up to £140,000. There is a £60,000 difference in how much you could borrow because of the different ways the lenders gauge affordability.

More information on affordability can be found in the ‘How much can I borrow on a mortgage?’ section on our website.

Can a joint mortgage be transferred to one person if I am self-employed?

Yes. In recent years, lenders have really improved the mortgages they provide for self-employed borrowers and there are plenty of options if you are transferring a mortgage and one or both of you are self-employed.

It is now common for specialist lenders to approve a mortgage based on 12 months of accounts and if you have recently moved into self-employment in the same line of work as when you were previously an employee, or you are near your year end, some lenders are even able to lend on shorter periods of trading history.

Trading history is one consideration in choosing a lender and it is also important to think about how your draw an income from the business. A common approach is to use affordability based on salary plus dividends for company directors, but there are lenders that can use profit retained within the business, which could enable you to borrow more.

Hypothetical example

You are the director of a Ltd company and a 50% shareholder of the business. The company makes an annual profit of £250,000 but you limit the salary and dividends you draw from the business to reduce your tax liability.

  • Salary: £12,000
  • Dividends: £40,000

A typical lender that considers salary and dividends and lends up to 5x income might be able to lend up to £260,000.

£12,000 + £40,000 = £52,000 x 5 = £260,000

On the other hand, a lender that considers profit retained within the business and also lends up to 5x income could lend up to £600,000

£250,000 x 50% = £125,000 x 5 = £625,000

Even though your circumstances have not changed, the way that different lenders treat your earnings can make a huge difference to the amount you are able to borrow.

Can I transfer my mortgage to another person if they work as a contractor?

Absolutely, there are lots of lenders that will approve mortgages for contractors. Some may ask for a minimum trading period, but others can lend to new contractors if they are working in a familiar line of work and there are options for workers employed on different types of contract.

Affordability on a contractor mortgage is generally based on the day rate a contractor earns and lenders will use this to establish a figure for annual income.

How much you are able to borrow as a contractor is generally based on the day rate you earn, and lenders will often consider annual income to be weekly rate x 46 weeks to allow for holidays and breaks between contracts.

Hypothetical example

  • A contractor earns a day rate of £500
    A lender would multiply this day rate by 5 to establish weekly earnings
    £500 x 5 = £2,500
  • Many lenders then consider annual income to be weekly rate x 46 weeks to allow for holidays and breaks between contracts.
    £2,500 x 46 =  £115,000
  • A lender might therefore base affordability on an annual income of £115,000

Can I put my partner on my mortgage if they have loans or credit card debt?

Outstanding debt on credit cards or loans will not prevent a mortgage from being approved, but it is likely to impact how much you are able to borrow as lenders consider outgoings and credit commitments when they calculate affordability.

Hypothetical example

You earn £50,000 a year and have monthly credit card and loan commitments of £500.

In its simplest calculation, a lender might subtract these commitments from your income when it calculates how much it can lend to you.

If the lender is able to lend up to 5x income, it could advance a maximum of £250,000.

  • £50,000 x 5 = £250,000

However, if the lender subtracts your monthly credit commitments as part of its affordability assessment, it might only be able to lend up to £220,000

  • Annual credit commitments = £500 x 12 = £6,000
  • £50,000 - £6,000 = £44,000
  • £44,000 x 5 = £220,000

Affordability on a buy to let property

Transferring a mortgage from one person to another is possible on a buy to let mortgage as well as residential loans, and there may be occasions when you split from your partner and want to rent the property out.

Affordability models vary between lenders, but recent regulations introduced by the Prudential Regulation Authority (PRA) have established some minimum standards.

So, if you are a basic rate taxpayer, the rental income has to cover at least 125% of the mortgage, assuming the mortgage is charged at 5.5%. For higher rate taxpayers, this increases to 145% or 160%.

Hypothetical example

Buy to Let mortgage balance = £200,000

Interest calculated at 5.5%

Monthly interest payments = £916

This means the monthly rental income would need to be:

125% (basic rate taxpayer) £1,146
145% (higher rate taxpayer) £1,328
160% (top rate taxpayer) £1,466

If the rental income that can be achieved by the property, is not enough, then the maximum loan size available on the property will have to reduce. There are, however, some lenders that enable landlords to borrow more than these calculations might allow, using something call ‘top slicing’. This is where a landlord can use their personal income to make up for a shortfall in rental income and could help to borrow more on a buy to let mortgage.

A lender will make additional affordability checks if you own 4 or more rental properties with buy to let mortgages. In these circumstances you are known as a portfolio landlord and lenders have a responsibility to assess your income and outgoings to ensure that your finances are not overstretched.

Can a mortgage be transferred to another person if they have bad credit?

If you are splitting up with a partner, payments on mortgages or other credit commitments can sometimes be missed or made late and it is not uncommon for people to emerge from a break-up with bad credit. So you might want to transfer a mortgage into joint names if you have a new partner.  Similarly, you might want to add a new partner to the mortgage who has some credit problems.

Fortunately, there are lots of options for people with bad credit and it is possible to borrow up to 90% LTV, or more with some lenders.

Two important factors, when considering your options, are the types of credit problems you or your partner have had and how recently they occurred, it will also be key to obtain copies of your credit reports from all three credit referencing agencies, find them here.

Late payments and arrears

If you or your partner has made a late payment on a credit commitment, then this will be recorded on the credit file. Late payments that are not brought up to date within a month are considered as arrears.

Late payments and arrears can be recorded on both secured debts, that are secured on the property, and unsecured debts. Lenders will consider late payments and arrears to be less severe on unsecured debt than secured debt, but there are lots of mortgage options for borrowers who have either on their credit record.

These options will depend on when the late payments or arrears were registered. A high street lender might typically look for a clean record in the last 12 months but there are specialist lenders that can approve mortgages for customers who have recent late payments and arrears.

Defaults

A Default is when there have been consecutive missed payments on a credit commitment and there are many lenders that will consider borrowers with Defaults. Options typically depend on how many Defaults there are, how much they are for and when they were registered.

It is possible to get a mortgage if you have had Defaults registered to your name as recently as in the last 3-6 months. even where they have not been paid off.

CCJs

A CCJ is a county court judgement, or court order, against someone who has failed to repay money. CCJs are often treated by lenders in the same way as Defaults and there are options for borrowers who have recent CCJs.

IVAs and Bankruptcy

There are lenders that offer high LTV mortgages to borrowers who are in an IVA or have been discharged from bankruptcy just 1 year ago.

Debt Management Plans

A Debt Management Plan (DMP) is an agreement between a borrower and their creditors to pay off debts, with reduced payments made over a period of time. It is possible to get a mortgage even if you are in a DMP if you have successfully maintained recent payments on the plan.

Property types

As a mortgage is secured on property, the construction of that property is another factor that have an influence on the mortgage options that are available. Most lenders will lend on properties built with standard construction methods, such as terraced/ semi / detached houses and purpose-built flats.

Options might be more limited for studio flats, ex-council properties or flats in high-rise blocks, but there are lenders that are happy to advance loans secured on these property types and more unusual properties.

that are built from less standard materials, but there are lenders that specialise in advancing loans on properties with non-standard construction.

Personal circumstances

Age

Traditionally lenders have had a maximum age at application or at the end of the mortgage term, but as the population is ageing and so many people work into retirement, there are now lenders that do not enforce a maximum age. These lenders will consider the affordability of the mortgage into retirement and are happy to lend if you can demonstrate that you are able to afford the repayments based on your retirement income.

Convictions

If you have previous convictions that are spent under the Rehabilitation of Offenders Act 1974, you do not have to disclose these convictions. You may need to declare convictions that are unspent, so speak with a specialist advisor who will be able to talk through the options available to you.

Speak to an expert mortgage transfer broker

If you are signing over a mortgage to an ex-partner, buying out a partner in a mortgage, or transferring a mortgage to another person, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 25th September 2018
OnlineMortgageAdvisor 2018 ©

FCA disclaimer

The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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