Should my daughter take on the mortgage after separating from her boyfriend?

Posted on 30 July 2007

My daughter and her boyfriend have just split up. They co-own a semi-detached house that they have spent months renovating, which is now done to the highest quality. He has agreed to a lump sum pay off, leaving my daughter with the mortgage she cannot afford. I have some capital I could give her to pay some off the mortgage to make the repayments affordable for her, but she is thinking of renting the house out and moving back home. Will she need to change the type of mortgage she currently has, and is it sensible to leave her name only as owner?

Hello Jane,
 
There are a few options. The first, as you say, is for someone else (you) to make a capital repayment which would bring the mortgage down to a level that your daughter can afford.  If you wish to do this but you are concerned that you are not named on the investment you can come to a private arrangement with your daughter in terms of making a formal gift, or you can speak to a solicitor if you want to take a share of the property: they can set up a second charge in your name.  It is best if you personally receive your own legal advice if you do invest anyway.

Alternatively, you could go on the mortgage with your daughter.  This would be suitable if you have a high enough income that your own mortgage payments and credit commitments leave some spare cash each month.  Most lenders would consider this for you if it is affordable.

Your daughter could also let the property, as you say.  The process is either a remortgage to a buy-to-let, or obtaining permission to let from the current lender.  Please read my answer posted up on 23rd July which explains in detail how a buy-to-let mortgage works and how to convert to one.

In terms of it being best to leave the property in your daughter's name alone:  Removing one partner is much the same as granting a mortgage to the remaining partner as a sole mortgage. They would normally let her have around 4 x income as the mortgage amount.  If the current lender will not allow your daughter to take over a big enough mortgage alone, but she is not tied in and can remortgage without any nasty charges, you could also see an advisor about remortgaging to a lender who will: there are lenders that will allow higher income multiples on the income that is available.

I absolutely must urge your daughter not fall into the biggest and most disastrous trap that is common to separation cases, which is missing a mortgage payment during the process.  This will instantly wipe out half of her financial choices by giving both her and the boyfriend the worst sort of mark on their credit scores. Please let her know that it is important to always just pay a mortgage however you can, and settle it up between yourselves afterwards.
 
Best of luck,

Katie

• Save to del.icio.us
• Digg this story