How can I borrow the most money to buy a new property by remortgaging my joint owned property with my sister?

Posted on 30 December 2007

My sister and I are arranging a remortgage on a property we own together for £129,000. As I would like to be able to buy a property on my own in the summer, we are going to put the house into either, solely my name (I would then have to borrow based on her earnings) or in hers with me acting as a guarantor. I earn £31,200, she earns £18,000. Which arrangement would allow me to borrow the most money in the summer for my own property? I will have £10,000 for a deposit.

Hello Georgina,

You have done the right thing to investigate taking advantage of your present remortgage to maximise your opportunities later in the year. Unfortunately, you are restricted on this one by simple affordability.  I'm assuming that the £10,000 deposit is not coming from the current house and that you have it as cash elsewhere.

Your own income should be allocated to wherever you personally are living.  You can't use a part of it to guarantee, as guaranteeing requires that you can afford all of both mortgages.

You can't change the current place to just your sister's name as £18,000 would not be sufficient to carry £129,000 alone.  Regardless of which property you own jointly, there is a shortfall of income.  i.e.: Putting the whole current place into your name would indeed mean that you would need to be borrowing on her earnings only for the new one. (You also need to consider that your sister would be off the property ladder for a while.)  However, this could work if you intend to have a sole mortgage on the current place (you can afford this on £31,200) but a joint mortgage and joint ownership of the new one, even though your income contribution would be £0. You could probably get 4.5 x income so £81,000 borrowing would give you a purchase price of £91,000. Which I suspect is not enough.

Of course this begs the question: why do you need to fund two houses on your income?  If you are living together in one house, and letting the other, then you should be buying the second one as a buy-to-let.  If you each intend to live in your own separate property, your own income is fine, £31,200 income with a £10,000 deposit could get you a property of £150,000; however it would be time for your sister to find someone else to share her mortgage with, as she simply can't afford somewhere of that size on her own.

Whatever you decide, you should both be getting separate legal advice on this.  I suggest you also get a solicitor to draw up the agreement between you on who owns what in terms of equity, so far.
 
Best of luck.

Category: Remortgaging

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