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Getting a Mortgage Using Joint Income

Everything that is involved when applying for a joint income mortgage

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By Pete Mugleston   Mortgage Advisor

Last updated: 27th February 2019 *

Is a joint mortgage a good choice for couples?

We receive lots of enquiries asking for more information about joint income mortgages. It may be that you’re a first time buyer looking to make your first purchase as a couple, remortgaging from single to joint applicants or purchasing a buy to let property with your business partners.

Joint income mortgages are not just for married couples. There are lots of different options available across a range of permutations. Once you’ve digested the information below it’s vital you make an enquiry with us, so we can arrange for a specialist we work with to contact you directly.

In this article we’ll look at:

How do joint income mortgages work?

Joint income mortgages are extremely common and are the most obvious way of allowing you to buy a property with somebody else. Combining incomes can offer the opportunity for higher borrowing, as two incomes are (usually) higher than one.

A joint mortgage means all parties associated, as mortgagees are jointly responsible for ensuring the mortgage payments are made as required.

You can decide amongst yourselves how the ownership and any equity is divided, with a tenants’ in common setup for example, but either way, the mortgage will be joint and several liability (which means all applicants are liable for the whole of the debt).

Most lenders will accept a joint income mortgage between two parties; however, some will consider applications between as many as four parties. Where there are more than two applicants, most lenders will only take two incomes into account, some will look at three and a few will consider four.

Who can have a joint income mortgage?

A joint income mortgage can be between:

  • Spouses
  • Civil partners
  • Friends
  • Family members
  • Business partners
  • Basically, anyone with a legitimate reason

Joint income mortgages for couples

Typically, most joint residential mortgages are taken out by spouses or civil partners who intend to live together.

If both you and your partner are earning an income it makes more sense to consider your combined household income when applying for a mortgage, as this will most likely improve your chances of a lender accepting your application under their affordability criteria.

Joint income mortgages for friends

Most lenders will accept mortgage applications from friends who want to purchase a property either to live together or for buy to let purposes.

It is always wise to consider the credit history of each applicant and agreeing on the ownership/equity allocation prior to submitting your application. If one party has a poor credit rating this will affect the entire application.

Also, be mindful that your lender will expect all the payments to be made in full, therefore, if one of the joint applicants is unable to make their share of the payments, the other applicant(s) will have to make up the difference.

Therein lies the problem with buying with a friend, as if you fall out there may be financial consequences!

Joint income mortgages for family members

Most lenders will accept joint mortgage applications with sole occupancy (where only one of the applicants is planning to live in the property). So, for example, where a parent wishes to help their child get on the property ladder they will make a joint application.

This will typically work best when the parent is still earning a regular income and has a much more solid credit background.

There are other options available in these circumstances such as guarantor mortgages, and also where a parent can use their property as security against their child’s mortgage.

For the right advice in this area you can talk to one of the specialist advisors we work with.

Joint income mortgages for business partners

This type of application can be used when business partners are looking to purchase a buy to let property.

It’s up to all the partners involved to ensure that the ownership and equity allocation is agreed before submitting the application. Most lenders will happily consider joint mortgage applications for this purpose.

How is ownership and equity share allocated with a joint income mortgage?

There are basically two types of ownership when you buy a property in joint names: joint tenancy and tenancy in common.

Joint tenancy means each party owns an equal right to the property with any profits from a sale shared equally. If one owner dies the remaining owner(s) inherit their share of the property. Spouses and civil partners commonly use joint tenancy.

Friends, families and business partners would normally use tenancy in common when taking out a joint income mortgage. This way, applicants are able to legally separate their share of the property by using a trust deed drawn up by a solicitor.

So if you’re looking for a joint income mortgage you should talk to one of the advisors we work with, they are specialists and will do everything they can to help you get a positive outcome.

How much can we borrow for a joint mortgage?

Traditionally most lenders have used a simple joint income mortgage calculator to establish how much a couple can borrow for a mortgage, based on a multiple of their combined income.

For example, a married couple with a combined household income of £60,000 approach a lender for a mortgage. This specific lender uses an income multiple of, say, 4x salary for joint applicants, therefore, would be prepared to lend these applicants up to £240,000.

The use of income multiples to define how much someone can borrow is all very simple and easy to understand. So, why change it?

Well, what if the couple in the example above have current outgoings that leave them with little or no disposable income each month? What if interest rates begin to climb quite rapidly a few years into their mortgage term and push up the monthly payments? What if the couple have children who need money to go to university?

All these ‘what if’ scenarios, alongside the volatility in the mortgage market in recent years has led to a number of changes following the Mortgage Market Review (MMR) in 2014. These changes have resulted in lenders taking a much more responsible approach, using in-depth affordability analysis, before deciding what an applicant is able to borrow.

The introduction of mortgage affordability calculators offers prospective borrowers a clearer opportunity for them to understand how much they can borrow, based on their current and future outgoings, before they move forward and submit their application.

Income multiples are still a key factor used by lenders when determining what an applicant is able to borrow. For joint applicants, most lenders will use an income multiple of 4x combined salary, some will use 6x combined salary and a few have no maximum at all.

Those lenders who offer no maximum income multiple will, most likely, base their decision solely on the applicants’ ability to pass the affordability models used by the lender.

For more in-depth information on this area take a look at our article here

What affordability tests do lenders use for joint income mortgages?

Each lender will conduct their own in-house affordability assessment criteria when reviewing an application. In a general sense, here’s a look at the type of areas a lender will scrutinise:

Income

For an employed applicant, lenders will take into account 100% of their basic salary. They will also take into account overtime, bonus schemes, regular commission and car or location allowances.

However, unlike base salary not all lenders will necessarily accept the total amount of these additions to earned income. Most will accept 50%, however there are some who will accept 100%.

Self-employed applicants will typically need to show evidence of past trading over a period of time. Usually lenders will look at self-employed income as net profit drawn from the business.

Most lenders will want to see a track record of at least 3 years, some will want to see 2 years, a few will accept only a 12 month track record, and a handful can even consider less than 12 months in the right circumstances.

Lenders will also look at joint applications where one of the applicant’s income is derived from other sources such as government benefits or rental income. Typically, one of the applicants in this scenario will need to have a strong track record of employment or self-employment.

Outgoings

In addition to your income position, a lender will want to take a very detailed look at your current outgoings and living costs. Such expenditure will include credit card and loan payments, utility bills and typical food and grocery costs.

In order to back up these costs a lender may want to see your most recent bank statements in order to corroborate this expenditure.

All of this may seem as though a lender is prying into your private financial affairs; however, they are doing this to ensure you’re clearly able to afford the monthly mortgage payments.

Future changes in your income and expenditure

A lender will also want to ‘stress-test’ your finances to be satisfied that you will be able to cope with any changes in your expenditure during the term of your mortgage.

The lender will want to be assured you will be able to meet your mortgage commitments if there is an increase in interest rates, if one of the applicants were unable to work or if you were to have children.

Such stringent affordability assessments are performed to provide confidence both for the lender and yourselves that you don’t run the risk of falling behind with your mortgage payments.

Lenders all use their own criteria for affordability assessments, therefore, you really need to speak to a specialist who understands all the different nuances. Make an enquiry and we’ll have one of the advisers we work with give you the right advice.

Can we apply for a joint mortgage but only one income?

 Yes, of course. It’s not unusual for many households to rely solely on one income, whether permanently or on a temporary basis.

Lots of couples, whether married or unmarried, may require one partner to be at home to look after their children or they may be unable to work for a variety of reasons.

In such circumstances, lenders will consider joint mortgage applications with one salary. The affordability assessments (as discussed above) will simply be applied to the income and outgoings of one set of earnings rather than two. The credit history checks will still be conducted on all applicants, which may actually help if both are very clean.

When a lender is considering any future changes to income and expenditure, it may well be that a partner who is not working intends to seek work opportunities at a later date (when the children reach a certain age, for example).

In this instance this would possibly add credence to an application rather than hinder it.

To get more information on this particular area, make an enquiry with one of the experts today

Can we apply for a joint mortgage if we’re retired?

The short answer is yes. However, if you’re retired or are approaching retirement it goes without saying that age would play a factor here.

Most lenders will have a maximum age at the end of a mortgage term of 75, some will lend up to a maximum age of 85, and a few have no maximum age at all.

The other factor to consider would be your income levels and, typically, pension income is lower than other forms of earned income, therefore, this may restrict the number of lenders willing to consider joint applications from retiree’s.

Applying for a joint income mortgage when approaching retirement can be tricky. If you get in touch, we can make sure an expert will be able to provide you with the right advice in this area.

How much deposit do we need for a joint mortgage?

There isn’t really any distinction between a sole or joint mortgage application and the deposit requirements set by lenders. Either way you will require a deposit in order to purchase a property. The general rule of thumb is the higher the deposit you can offer; the more lenders will be willing to consider your application.

A mortgage application with a low deposit will be seen as riskier, resulting in less lenders giving it due consideration and those who will may apply higher interest rates to negate this risk.

Most lenders will accept deposits of 20%, some will accept 10% and a select few will accept as little as 5%.

Understanding deposit requirements across the entire mortgage market can be quite a task. It’s important you speak to an expert who will be able to assist you on this subject.

Can we get a joint mortgage if one or both of us has a poor credit history?

A bad credit rating can, no doubt, cause problems with a mortgage application – whether on a joint or sole basis - depending on the type of issue you’ve had and when it was registered.

The good news is there are some lenders who will look at applications from borrowers who have had credit issues in the past and a few who specialise in these types of applications.

Certain specialist lenders will consider:

  • Joint mortgage applications with Late payments
  • Joint mortgage applications with Defaults
  • Joint mortgage applications with CCJs
  • Joint mortgage applications with Mortgage arrears
  • Joint mortgage applications with Debt management plans
  • Joint mortgage applications with IVAs
  • Joint mortgage applications with Bankruptcy
  • Joint mortgage applications with Repossession

Speak to a joint income mortgage specialist

If you are ready to look for the right mortgage for you, have a question or you’d like to know more, 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: 27th February 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info 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. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.