Mortgage With Family And Friends

In this article, we’ll explain if it’s possible to get a joint mortgage with family and friends, how this works, which lenders offer this type of mortgage and how a broker can help you get one.

Can you get a joint mortgage with family and friends?

Yes. Getting a mortgage with a friend or family member is perfectly possible.

From a lender’s perspective, the process is similar to a joint mortgage for a couple. The only real difference is how they calculate borrowing power.

While you can include up to four borrowers on a mortgage with some lenders, typically, the maximum you can borrow would be an income multiple of the two top earners. Some providers will go to three – or even four – applicants at their discretion.

How would this work?

There are two ownership options when taking out a joint mortgage:

• Joint tenancy – This is the most popular choice for couples. Each borrower owns the whole property together.
• Tenants in common—Ownership is not shared equally, and you can split the portions any way you like. This is most popular with groups of friends or family members who are each contributing different amounts towards the deposit, mortgage repayments, and maintenance costs.

See our dedicated article on joint tenants vs. tenants in common for more information.

It’s important to have an open and honest discussion about what is best for you and how you will make things work practically as soon as possible. The solicitor can advise you further on this.

All lenders will require that at least one of the applicants be named on the bank account from which the direct debit will be paid. This account will be used to make mortgage repayments, and you will all need to transfer your share of the funds into that account in good time.

However, you may want to use that account to pay household bills and/or store savings for emergency repairs or DIY jobs. These issues should be discussed early on in the process to ensure all parties are clear on how responsibility is shared.

Signing a deed of trust

If you choose to buy as tenants in common, you should speak to a solicitor who may recommend a deed of trust. This will clearly define each owner’s duties and responsibilities and help to avoid disagreements or confusion further down the line.

This could include things like:

• What share of the property each person owns
• Financial responsibilities of each party
• An inventory of personal possessions (furniture, white goods, etc.)
• How disputes will be resolved

What happens if one person can’t afford to pay their share?

With joint mortgages, all parties are equally responsible for making full repayments. That means that if one person can’t afford their share, the mortgage provider will still expect the full payment to be made.

What about if somebody wants to move out?

If one (or all) parties want to move out, there are several options.

An individual’s share could be bought out, or you could agree to rent the vacant room(s). (The lender may require consent for this).

In these circumstances, your best bet is to speak to a broker to discuss your options and agree on a course of action.

Would everyone named on the mortgage have to live in the property?

Not necessarily, but the expectation would be that this type of mortgage arrangement would be based on the assumption that all applicants would also live there.

If an arrangement is required where a family member assists another in getting on the property ladder with no intention of living there themselves, better alternatives may be available, such as a guarantor mortgage or a joint borrower sole proprietor mortgage.

Can you get a mortgage with a retired parent?

Yes, it’s possible. There are no real barriers to buying with any family member, but age and affordability can be an issue when buying with retired parents or grandparents.

This is simply because some lenders have an age cap. If the oldest borrower is 55 and a lender’s maximum age for mortgage applicants is 75, you will be limited to a 20-year mortgage, resulting in higher payments than 25 years.

The good news is that some lenders have a maximum age of 95, and some places do not have an upper age limit on lending.

How to get a mortgage with a friend or family member

Follow these steps to get a mortgage with family or friends:

1. Speak to a broker – In other circumstances, this step might come later, but this should be your first port of call here. This is because your short, medium and long-term plans for the arrangement will determine the best way to proceed and the right deal for you. A mortgage broker with experience securing this type of loan will also be able to advise you all on any steps you need to take to maximise your chances of approval before going ahead with an application. This might include considering a range of insurance products to protect all borrowers in the event of an unexpected change in circumstances or just tidying up your application.
2. Act on the advice – Your advisor may suggest you clear up any discrepancies on your credit files, get yourselves on the voters register, be more specific with your budgeting, or it might be something else. Whatever it is, get it done as soon as practicable so you can move on.
3. Make the formal arrangements—Once everything is in place and you have an agreement in principle, it’s time to find a property, complete your full mortgage application, and decide whether you will be tenants in common or joint tenants.

Eligibility criteria

Eligibility is not stricter for joint mortgages with friends or family, but it is slightly different.

All borrowers must individually meet lenders’ criteria. So, it’s worth chatting about credit files when you start planning your home-buying venture. One applicant with a poor credit history could mean veering away from high street lenders and looking for specialist bad credit mortgage providers.

Some providers will have a maximum borrowing amount of, say, £250,000.

Other mortgage products, such as offset mortgages and open plan flexible mortgages (OPFMs), will be limited to two borrowers with some lenders.

In most cases, all borrowers are expected to use the property as their main residence. However, there are often exceptions for borrowers who are getting assistance from parents or grandparents.

Which lenders offer this type of mortgage?

Joint mortgages are pretty common, and most lenders offer them. If you and one friend or sibling want to buy a house together, almost all UK lenders can help, provided you pass standard eligibility checks.

The good news for larger groups is that more than fifty providers, including major high-street banks such as Halifax and Barclays, are willing to accept applications.

According to a group’s specific circumstances, the best deals are often found via specialist lenders.

Can you take over a mortgage from a family member?

This is possible but not always straightforward.

The person taking over the mortgage must meet the existing lender’s eligibility and affordability criteria. And if the provider no longer offers that deal, they may not be willing to transfer it.

Rather than going straight to your lender, you’re advised to speak to a broker. They may be able to arrange a better deal elsewhere that saves you money and avoids the hassle of transferring a mortgage.

Can you add a family member to your mortgage?

Technically, yes. If you’re not looking to change the amount you initially borrowed, you can add someone by completing a Transfer of Equity procedure with your existing lender. However, the incoming borrower will still need to meet the lending criteria. If you want to change an existing mortgage, you would need to refinance the current terms, which can include adding someone to the new agreement.

Can you get a mortgage for someone else?

It’s common for parents to want to help their children get on the property ladder, and there are many ways of doing so:

• Buy a house outright for your child(ren)
• Family offset mortgages – Using parents’ savings in lieu of a deposit
• Guarantor mortgages – Parents guarantee repayments
• Joint owner sole proprietor mortgages – Parents become jointly responsible for the debt but take no ownership rights over the house
• A gifted deposit – Parents must provide written evidence that the deposit money has been gifted and doesn’t need to be paid back.

Get matched with a broker who specialises in mortgages with friends or family

There is a lot to consider when taking out a joint mortgage with friends or family, but don’t let that put you off, taking an important step in your life and getting on the housing ladder.

By partnering with a mortgage broker who deals with these loans daily, you can rest assured you’ll receive expert advice and the best deal for your circumstances.

To find the right advisor for you, use our unique broker-matching service. We’ll ask for a few details and then search our database of UK brokers to find the one best suited to your requirements.

Call today on 0330 818 7026 or enquire online to arrange a free, no-obligation chat with an expert.