How to Add Someone to Your Mortgage

Why Add Someone to Your Mortgage?

There are several common reasons for adding a person to your mortgage. You may have a new partner who is moving in and wants to share ownership of the property. A family member might be joining the mortgage to help with affordability. Or you may simply want to formalise shared ownership of a property you have been living in together.

Adding someone to the mortgage means they become jointly responsible for the repayments and gain a legal interest in the property. This is a significant financial and legal step, so it is important to understand the implications fully before proceeding.

How the Transfer of Equity Process Works

The process of adding someone to a mortgage is known as a transfer of equity. It involves three key steps:

• Lender approval – your mortgage lender must agree to add the new person. They will carry out a full credit check and affordability assessment on the incoming borrower.
• Legal transfer – a solicitor or conveyancer handles the legal paperwork to add the new person to the property deeds and mortgage.
• Land Registry update – the ownership records at the Land Registry are updated to reflect the new joint ownership arrangement.

Your existing mortgage deal usually remains in place, though some lenders may take the opportunity to reassess the terms. If your current lender will not agree to add the new person, you may need to remortgage with a different lender who will accept both borrowers.

The whole process typically takes four to eight weeks, depending on how quickly the lender and solicitors work.

Financial and Tax Considerations

When you add someone to your property, there may be stamp duty implications. If the person being added already owns another property, the 5% surcharge on additional dwellings may apply to their share of the property value. This can be a significant cost that catches people off guard.

If no money is changing hands and neither party owns another property, stamp duty is usually not payable. However, if the person being added is paying you for their share, stamp duty may apply on the amount they pay. It is essential to get specific tax advice before proceeding.

You should also consider how the ownership will be structured. Joint tenants each own the whole property equally, and if one owner dies, the property automatically passes to the survivor. Tenants in common can own different shares and can leave their share to whoever they choose in their will. A solicitor can advise on the best structure for your circumstances.

What If Your Lender Says No?

If your current lender declines to add the new person, perhaps because of their credit history or income level, you have the option of remortgaging to a different lender. The new lender will assess both borrowers together and, if approved, issue a new joint mortgage that pays off the existing sole one.

This may also be a good opportunity to shop around for a better rate, especially if your current deal is due to end soon. A mortgage broker can help you find lenders who are most likely to accept both borrowers and secure the best available deal.

Bear in mind that remortgaging may involve costs such as arrangement fees, early repayment charges on your current mortgage, and legal fees. Weigh these against the benefits of having a joint mortgage, including potentially increased borrowing capacity and shared responsibility for payments.