How do you "move" your mortgage?

Question

We have a £69,000 mortage on our 3 bed Victorian Terrace.

We hate the area we live in and desperately want to move bnut we will not be able to raise any additional funds or a bigger mortgage as only my partner is working right now and he's on a very low income (£11,500 pa). We won't make much out of selling our house as its not in great condition and we only bought it in 2005 so prices haven't gone up that much.

I've seen some lovely shared ownership houses in a nicer area for £60,000 (you get a 40% share for that).

How does this work? Could we "move" the mortgage we have to the new house? And if we owned a 40% share would we then have to pay rent for the 60% we don't own? Presumably the other 60% is owned by a Housing Association so the rent would not be too high.

And advice gratefully received as I desperately want to leave the area we live in now.

Answer 1

You can't move your existing mortgage as it is on the house and not on you. If you have only one wage coming in that's what the new mortgage will be calculated on. You can shop around and see adverts for 5 times income but you are unlikely to qualify for this level as there is also an affordability calculation which lenders make.

As far as shared equity is concerned you pay mortgage on the 40% but the rent on the other 60% is normally set quite low just so people such as yourselves can afford it.

If you have better times in the future and both have jobs than you can buy a larger proportion of the property at the price it is worth at the time.

I advise you go to the Citizens Advice Bureau or yoiur locqal council and they will help all they can.

Answer 2

Whilst it is sometimes possible to move a mortgage from one property to another -- ask your lender, they'll tell you -- moving it from a sole ownership situation to a shared equity scheme may be problematic. Again, you'll have to ask your mortgage lender.

A more important consideration is this: Can you afford to do this in the first instance? As you would only be receiving a 40% stake in the new place and would have to pay rent on the remaining 60%, are you able to make the repayments on your current mortgage as well as the rent payments on the 60% non-owned share?

If your only household income is your partner's current £11,500 pa, you must be living pay packet to pay packet as it is. You are assuming that the rent would be low but have you determined exactly how much it would be? And have you determined how much it might rise in the future? And is there a term limit on the part ownership scheme -- in other words, will you be forced to buy out the remaining 60% share in a few years and what are your prospects for making those payments then if that is the case?

Whilst it may be possible to do what you are asking, you'll need to do a lot more legwork and get all of the facts together before you take the leap. You don't want to take the leap and find yourselves over the abyss!

Answer 3

When you sell your house you have to redeem your current mortgage and take out a new one for your new property. You would need to speak with your current Mortgage Lender to find out whether they will loan you the full £60,000.00 to buy a part share in another property. The remaining 60% will be owned by some form of Housing Association and you will need to pay rent on the share you don't own. The Estate Agents or Housing Association selling the new house will be able to tell you what the rent will be.

Answer 4

Shared ownership could well be the way to go. I would however urge you both to discuss this with an independent mortgage advisor. The financial arrangements will play a big part in you making your decision.

Good luck to you both.