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Joint Mortgages in the UK

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By Pete Mugleston   Mortgage Advisor

Last updated: 30th August 2018

Introduction

Here at Online Mortgage Advisor we have many customers contacting us on a daily basis that are in the early stages of buying a new home together with their partner, parents or even a group of friends and asking us if it’s easier to get a joint mortgage.  The good news is that the team of expert advisors we work with can help fulfil that home ownership dream.

In this article, we will talk about how a joint mortgage can easily be agreed and also discuss some of the other factors that will need to be considered.

We will cover a range of topics including:

When considering a joint mortgage, there are a number of factors that will impact your choice of mortgage, whether you’re married or looking for a joint mortgage unmarried, and we will provide you with information about each of these.  They include:

  • Deposit
  • Affordability
  • Credit history
  • Property type
  • Employment
  • Personal circumstances

What is a joint mortgage?

A joint mortgage is defined as purchasing a property together with one or two people on a mortgage and sometimes up to four. All the individuals named on the mortgage are responsible for making repayments in full, every month.  During the house buying process you can also decide between you how to share the equity in the property with a joint mortgage agreement; this is an area we will cover in more detail later in this article.

The process of obtaining a joint mortgage is the same as if you were buying a property on your own i.e. sole mortgage, however the other people named on the joint mortgage must sign all documents and meet with solicitors etc.

Who can get a joint mortgage?

If the question is, can my partner and I get a mortgage? The short answer is ‘yes’, in fact getting a mortgage with a partner is relatively straightforward. Most joint mortgages are taken out by 2 people who are usually a couple, however they can also be taken out by unmarried couples and civil partners and, in some cases, lenders will allow up to four people to buy together and you can have more than one joint mortgage if you want.

A joint mortgage can also be obtained in the following scenarios:

  • One or more friends or family members you intend to live with.  It is quite common in London for groups of friends to get together to buy a property instead of renting due to the escalating property prices.
  • A friend or family member who wants to help you afford a property or buy part of one as an investment. This is often referred to as a guarantor mortgage, which we will discuss later.
  • A business partner who wants to invest in property with you with the view to letting out the property or residing in it.

 How does a joint mortgage work

As mentioned earlier, everyone named on a joint mortgage is equally responsible for making sure the full repayment due is made to the lender each month.

You may however decide to split the payments 50/50, but if the other borrower stopped paying their half, the lender could pursue you.

“Do you need a joint bank account for a joint mortgage?”

Whilst it’s not compulsory for the application, it may help with your own budget planning to set up a joint bank account to fund the monthly commitment.

If you want to make any changes to your mortgage like borrowing more or changing it to a new fixed rate deal, this will have to be authorised by all of the borrowers and Online Mortgage Advisor will be able to help you with joint mortgage advice.

There are two ways you can own property with a joint mortgage, joint tenants and tenants in common. Here we discuss these in more detail to help you understand which would better suit your individual situation.  If you require any further clarification or assistance our experts will be able to guide you through this.

What are the different types of options available to me?

There are different types of joint mortgage, but owning the property equally as joint tenants is usually used by long term couples and ensures all the borrowers are legally seen as one owner, and therefore in the case of a joint mortgage application, all parties involved have the same rights to the property i.e. a joint equity mortgage.

The best option when getting a joint mortgage is adopting the joint tenants scenario, where there are joint names on the mortgage. This ensures that if one borrower died, the other named borrowers would inherit their share of the property.  Also, in the case of a joint income mortgage, should the property be sold, all profits are split equally; and finally, if the property is re-mortgaged a new joint name mortgage will need to be obtained.

How to get out of a joint mortgage in the UK

There are many reasons that you may want to get out of a joint mortgage ownership. You’ll need to discuss your leaving with your fellow joint mortgage holders and once you have agreed the terms, contact your mortgage provider and let them know that you want to be taken off the mortgage. There may be some costs involved, so you’ll need to discuss this with your mortgage provider and ex-partner/s.

What is a joint venture mortgage?

This is similar to most joint mortgages in the UK, except that usually, two or more investors will pool their resources to buy and sell property for profit. Mortgage joint ventures are based on shared risk and reward. If you base your joint venture mortgage on a 50/50 split of profits, then you are also exposed to 50% of the losses as well.

Which is best, joint or single mortgages?

Whether the best option is a joint mortgage or not, depends entirely on your circumstances and what you’re trying to achieve, which may include –

  • Whether you’re married or not
  • Whether one of you has a bad credit history
  • If you want to purchase a ‘buy to let’ in one name for tax purposes (a sole mortgage application when married is quite possible)
  • If you feel that two incomes will let you buy a better home
  • If you want the maximum joint mortgage loan possible
  • If you need a joint ownership mortgage i.e. with friends
  • If you want to get a joint mortgage if one person is not working

There are many more variables when it comes to joint mortgage vs individual mortgages, so your best option is to talk to a money saving expert on joint mortgages. One of the advisors we work with will be able to point you in the right direction.

Tenants in common

Tenants is common is an alternative to joint tenants as it means that all parties legally own separate shares in the property. This is the reason it is usually used when friends, family members or business partners buy a property together. For instance when you are looking for a joint mortgage with a boyfriend or girlfriend, or perhaps where there is an unequal deposit being used to purchase the property.

The benefits of tenants in common are that the percentage share is chosen by each borrower and it does not have to be split evenly, very useful when unequal deposits are being used, which would make it a joint mortgage with unequal shares.  Should the situation arise, this method means each borrower can sell their share separately, also this share can be left to someone else in a will.

A solicitor can draw up a deed of trust, which is a legal document that specifies the percentage of the property you each own and our experts can help with guidance on which scenario would fit your joint applicant the best.

How much can we borrow on a joint mortgage?

We are regularly asked, when it comes to a joint mortgage, how much can we borrow? When applying for a joint mortgage, lenders have different ways of working out how much can you borrow on a joint mortgage, and many will have affordability calculators that are based on both your income and your monthly outgoings.

Generally speaking, there’s a standard approach to how many times salary for a joint mortgage you’ll be allowed. If you’re taking out a mortgage for two people, it would be up to 3x or 4x your joint income. However, there are some lenders that can advance up to a maximum mortgage of 5 times joint salary or 20 percent, but a few will go to 6x income. This could however, be significantly reduced if you’re such looking for a joint mortgage, but only have one income.

In addition to this, different lenders will consider additional sources of income for joint mortgage loans, such as bonus, overtime or investment income, in very different ways. Some lenders will use 100% of additional income sources in their affordability calculations, but others may only take 50% or might not include them at all. This also applies to any Government related benefits you may receive, for example child tax credit, which is demonstrated in the example below.

Example of a joint mortgage calculator

Your basic salary is £30,000, but you are entitled to £3,500 in Child Tax credits and your wife earns £18,000.  Here’s what different lenders might be able to lend to you:

  • Lender 1 will not consider your child tax credit and will work out your maximum loan using an affordability calculator, so the maximum they will lend is £215,520
  • Lender 2 will use 50% of the child tax credit and will also, subject to loan to value limits, multiply your joint income by 4.85.  Therefore the maximum this lender will offer is £241,287.

As you can see there is a significant difference in the calculated amount these 2 lenders will offer a joint application and this is one of the strengths we have at Online Mortgage Advisor, because the experts we work with can search the market to get you the best mortgage available based upon your circumstances.

It should be noted that when two or more people sign a mortgage which incorporates joint liability, then the situation of joint and several liability mortgage arises, which means that both parties are responsible for the full debt, so if one partner is unable to make their share of the mortgage payments, then the other partner must make good the shortfall. This would also apply if you had a second mortgage with a partner.

The impact of your credit record on a joint mortgage

There are lots of joint mortgage options for people who have experienced credit problems and it is now possible to borrow up to 90% of the value of the house (known as Loan To Value), or even more with some lenders.

Your choice of mortgage will depend on the type of issues on your record and how long ago they happened.

Here’s information about typical types of credit problems and some of the things to think about:

Defaults & CCJs

A Default occurs when an account has had consecutive missed payments and a CCJ is a county court judgement, or court order, against someone who has failed to repay money.

There are lots of lenders that will consider borrowers with CCJs or Defaults, even where they have not been paid off, or satisfied. It is even possible to get a mortgage if you have had CCJs or Defaults registered to your name as recently as in the last 3-6 months. Typically, your options will depend on how many Defaults/CCJs there are, how much they are for and when they were registered.

Late Payments and Arrears

There are also lots of options for borrowers with late payments or arrears on their record and an important consideration here is whether they are for missed payments on secured or unsecured debts.

An unsecured debt is one that is not secured on property, whereas a secured debt is secured on property and if you fail to make payments a lender could repossess the property to reclaim its money. Lenders will consider late payments and arrears to be less severe on unsecured debt than secured debt, but there are options for both.

Again, your options will depend on when the late payments or arrears were registered. There are plenty of options from specialist lenders for customers who have recent late payments on their credit record, but a high street lender might typically look for a clean record in the last 12 months.

IVAs and Bankruptcy

There are lenders that offer high LTV (loan to value) mortgages to borrowers who are in an involuntary agreement (IVA) or have been discharged from bankruptcy just 1 year ago.

Debt Management Plans

If you are currently in a Debt Management Plan (DMP) to pay off debts and you have successfully maintained recent payments on the plan, there are lenders who will be able to lend to you.

Many lenders that specialise in providing mortgages to people with bad credit only distribute their products through mortgage advisors and so, by talking to an advisor, you will have access to more options than if you were to contact lenders directly. We work with specialist advisors who have an in-depth knowledge of the criteria for different lenders and will be able to find the best deal for your circumstances.

Deposits

In the modern day mortgage market, lenders now require some form of deposit when purchasing a house and it can be that a larger deposit opens the door to many more options in terms of the maximum loan available to you and your partner.  We have a team of experts that will ensure all options are explored and we obtain the right mortgage based upon your circumstances.

The source of the deposit can also be important to some lenders as some will allow the deposit to come from a family member whilst others will ask to see evidence of the deposit in a bank account in the applicant’s names.

Another important factor for you as joint applicants to consider is whether the deposit is equal between all parties.  If one applicant is contributing a larger part of the deposit, so you have a joint mortgage with unequal deposit you may wish to consider taking out a mortgage on tenants in common basis (discussed above).

Our experts will be able to guide you through all the considerations the mortgage lender may have with regards to your deposit.

Can I get a joint mortgage with my parents?

The answer to this increasing common question is, yes!  The changes that the mortgage industry has seen over recent years and the impact on the housing market has meant it is much harder for first time buyers to get onto the housing ladder, therefore lenders are increasingly offering guarantor mortgages so parents can help their children fulfil the dream of owning their own home.

With the help of your parents you may be able to afford a larger mortgage and have access to a wider range of mortgage deals.

You will still have full ownership of the property but both you and your parents will be responsible for maintaining the monthly mortgage commitment, therefore all parties need to be able to demonstrate affordability for this commitment.  In the future, should your circumstances change and you feel you can afford the payments yourself, it may be possible to remortgage the property and release your parents from their role as guarantors.  This is an area we can help you with.

It is important that any guarantor seeks independent tax and legal advice to ensure all parties understand your joint mortgage rights and any risks involved.

Can I get a mortgage if I already have one with an ex?

The short answer is yes, however as with any joint mortgage it is subject to you meeting the lender’s affordability criteria and it may restrict the amount you can borrow.

This is because lenders will look at the monthly commitment on the other property and deduct it from your disposable income. The team of experts we work with will be able to advise you on which lender will suit this not uncommon situation.

Another situation that you may find yourself in is having an ex-wife or ex-husband still on a mortgage. The problem here is that if you should die, your half could go to your ex, which may not be an ideal situation if you have children or a new partner.

Joint mortgage comparison – who has the best rates?

Every lender is different, which is why we work with ‘whole of market’ mortgage advisors who have access to the best rates and deals across all lenders.

Some of the main high street names such as HSBC, Barclays, Natwest and Nationwide accept joint mortgage applications. But as everyone has individual circumstances, they may not have the best rate or deal for you, which is where the advisors we work with come in. They will look at every lender on your behalf to get the best possible deal.

What is joint mortgage protection insurance?

Many people ask us, what is joint mortgage protection? Put simply, it’s an insurance policy that will cover the cost of your mortgage payments, should you become sick, incapacitated or even unemployed.

You have two options for joint mortgage payment protection insurance. One specifically covers your mortgage repayments, while the other one is general income protection insurance, where you can use the payments as you see fit.

Another option is joint mortgage life insurance. This is a policy that, should the policy holder die, would pay out a lump sum that would be used to repay the mortgage in full. This would be especially useful if you have a joint mortgage with only one person working and the breadwinner is the one that passes away.

We believe that joint mortgage payment protection is essential for peace of mind and to ensure that you don’t lose everything you’ve worked so hard for.

Conclusion

To conclude, we hope this brief article of joint mortgages has given you confidence that there are many options open to you as joint applicants and that even if your own personal bank of many years has said ‘no’, it doesn’t mean every other lender will.

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 no obligation or marks on your credit rating.

Updated: 30th August 2018
OnlineMortgageAdvisor 2018 ©

FCA disclaimer

The information 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.

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.

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