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Joint Tenants versus Tenants in Common

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 8th November 2019 *

Joint mortgages come in more than one variety. There are joint tenant deals and tenancy in common mortgages, but what’s the difference between them and which one is right for you? This guide answers these important questions and many more.

The following topics are covered below…

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Joint tenants vs. tenants in common: What’s the difference?

Joint tenants jointly own the whole property, and are both wholly liable for the mortgage debt, even if one person stopped contributing.

Tenants in common, meanwhile, are both owners who own a specified portion of the property, but are still wholly liable for the mortgage debt.

Couples have been buying properties together for years. But now, due to significant house price gains and higher deposits required to buy, the practice has become popular with a wide number of demographics.

In London and the South East especially, buying with friends or siblings can be a necessity rather than a choice. Getting a mortgage as tenants in common can be the best way to get a foot on the property ladder and escape the private rental sector.

It should be noted that despite the term ‘tenant’, this has nothing to do with renting out a property as a landlord. For information on that, check out our guide to buy-to-let mortgages.

How do joint tenant mortgages work?

A mortgage with joint tenants is the model commonly used by long-term partners and married couples.

Under the terms of a joint tenancy mortgage, the death of one partner would mean the property is automatically transferred to the other owner, along with the mortgage liability.

The law treats shared tenancy mortgages as though each person owns the whole of the property, so any remortgage or sale would entitle each owner to an equal share of the proceeds, which is the advantage of a mortgage with tenants in common.

How do tenants in common mortgages work?

With a tenants in common mortgage, each owner has their own share of the property that they can pass on in their will.

A joint tenancy mortgage doesn’t have to be equal – it could be 50/50 or 70/30 etc – so this could be ideal if applicants are investing different sums of money into a property, whether via a deposit or mortgage payment contributions.

Tenants in common could be suitable if you’re buying with a group of friends, though there are other scenarios where it makes sense.

The experts we work with can help calculate what your tenants in common mortgage payments or your joint tenancy mortgage payments might be.

For cohabiting couples with children from a previous relationship, they could register as tenants in common to ensure their respective children benefit in their wills.

It could also be used by an older owner living with a partner wanting to ensure their entire home isn’t used to fund care home fees.

Are there any disadvantages?

As is the case with any financial product, there are a few drawbacks you should be aware of. Firstly, tenants in common is a more complex arrangement than a joint tenancy mortgage, which might be off-putting if you prefer things to be straightforward.

Secondly, there can be issues if one of the tenants needs to move into long-term care. In this scenario, their share of the property would usually pass to the local authority, meaning the tenant who remains in the home could find it difficult to ever move house. 

Who is responsible?

With tenants in common, mortgage liability is the responsibility of both (or all) parties, so joint tenancy mortgage payments have to be made by everyone named on the mortgage. 

If one person fails to make the payments, the other must make up the shortfall, or their credit rating will take a hit as well.

Can tenants in common have unequal shares in a property?

Yes. It’s not uncommon for tenants in common to hold unequal shares in a property.

Most experts would recommend entering a legal agreement with the other party or parties to establish who owns what, especially if you’re the one who owns the larger share of the property. 

This can safeguard all parties if you were ever to fall out with the co-owner(s).

How tenants in common mortgages are calculated

Online calculator tools will only offer you a rough idea of the amount you can borrow and the overall cost involved, but understanding how a lender will calculate these things can give you a firmer understanding of the deals you will qualify for.

Calculating ownership

>Online calculator tools will only offer you a rough idea of the amount you can borrow and the overall cost involved, but understanding how a lender will calculate these things can give you a clearer understanding of the deals you will qualify for.

Calculating affordability

If you want to calculate what mortgage you can afford to borrow as tenants in common, then this is done in the usual way, with lenders considering incomes from all applicants regardless of ownership type or amount. 

Most providers cap their lending at 4.5 times salary, some 5 times and a minority 6.

Calculating costs

If you want to calculate how much a tenants in common mortgage might cost, then it’s important to know that the rates and deals are the same as any standard mortgage. Ownership type has little to no impact on which product you’d have access to.

To get a mortgage quote on the best deals for you, make an enquiry and we can refer you to one of the expert brokers we work with for the right advice.

Qualifying for a tenants in common or joint mortgage

Whether on a joint mortgage or tenants in common, borrowers must be ‘jointly and severally’ liable to pass lenders’ criteria checks. If one person stops paying their share of the mortgage, this needs to be covered by one of the other owners.

Typically, there aren’t big differences between the two models when it comes to getting a loan – it’s not a case of getting a joint tenancy mortgage or a tenancy in common mortgage.

Indeed, it’s only after the advisor has recommended a mortgage, submitted the application and secured you an offer that the solicitor speaks to you about how you want to own the property. This is when you will need to decide if it will be a joint mortgage or tenants in common, although obviously it’s a good idea to know ahead of this what your intentions are.

Up to four people can be registered as legal owners of a property, depending on the lender.

In the event of the property being sold or remortgaged, all of the owners need to agree, barring the courts getting involved if one of the owners wishes to force a sale.

General criteria for getting a joint or tenants in common mortgage in the UK

While lenders will allow up to four applicants to take out a mortgage for tenants in common, typically they might only take into account the incomes of the two people who earn the most. There are, however, some lenders who will accept the incomes of all four applicants. 

To establish borrower eligibility, lenders will look at:

  • Credit scores
  • Debts
  • Financial commitments 
  • Spending

If one of the two applicants has bad credit or is self-employed you might need to use a specialist lender rather than a big high street provider but there are plenty of options available.

The brokers we work with are whole-of-market brokers with access to lenders both on and off the high street, they will be happy to help you find the right lender with a mortgage to suit your needs.

Make an enquiry and we’ll match you with someone with the right experience to help with your situation, whatever that may be.

Usual lending criteria applies and, while every lender is different in what they will and won’t accept, most lenders will generally consider:

  • Affordability: Most lenders consider 4 .5x income, some 5x income and a handful will consider up to 6x income. Some lenders favour self-employed where others have flexible policy for additional variable income such as bonuses and commission.
  • Deposit: Most lenders require a minimum of 10% deposit, however some will consider just 5% in the right circumstances.
  • Credit history: There are lenders considering all types of credit issue - the more severe and recent they are, the higher the deposit required.
  • Age: Older borrowers may struggle to borrow into retirement with some lenders, or need shorter terms impacting affordability, where others can lend to later in life, some with no age limit at all.
  • Property: Some property can be considered higher risk, such as ex. Local authority, high rise buildings,non-standard construction etc. so can require a higher deposit).

It’s crucial to trust the person - or people - you’re buying with to sort out how you’d deal with all kinds of eventualities, not least when applying for your mortgage in the first place. 

Whatever your situation or requirements, make an enquiry and one of the expert brokers we work with will be in touch to offer advice. 

We won’t charge a fee to introduce you and, with their help, you could save time, hassle and money.

What is a Declaration of Trust?

A Declaration of Trust is a legal document stating who possesses which portion of a jointly-owned property, and what will happen if the other person sells up.

It’s common for trust to be established in a legally-binding way. A Declaration of Trust can be created with an official document detailing what happens when one of the owners wants to sell.

The declaration can determine how the owners contribute towards the deposit, mortgage payments and other expenses like stamp duty, as well as how profits would be distributed in the event of a sale.

This can be especially useful in calculating who owes what, when it comes to getting a mortgage for tenants in common who are making different mortgage payments.

First-time buyer joint or tenants in common mortgages

To qualify for first-time buyer stamp duty relief, all applicants must be first-time buyers.

That means a home-owning parent buying jointly with a first-time buyer would trigger significant stamp duty costs, so they may want to consider gifting a generous deposit.

People buying second homes currently incur a 3% surcharge, so the stamp duty increase could be hefty.

As an alternative, some lenders offer options where a family member can contribute to the mortgage without being a co-owner, which is known in the industry as joint mortgage, sole proprietor.

Switching from joint tenants to tenants in common

If all the owners are on board, severance of a joint tenancy mortgage can be agreed, this is where joint owners become tenants in common and vice versa, by filling in a new or updated trust deed. 

There are scenarios where this makes sense; such as if you’re divorced or separated from your partner. Changing to tenants in common could ensure the ownership of the property wouldn’t go to your ex!

Meanwhile, a couple could show a deeper commitment to one another by switching from tenants in common to joint tenants.

What happens if a co-owner of a property dies?

As already discussed, if one of the co-owners dies under a tenancy in common agreement their share of the property would usually go to whoever is detailed in their will.

Under the terms of a joint tenancy agreement mortgage, the ownership would pass to the other owner, although they would need to apply to be the sole owner first.

If the property had an outstanding mortgage it may be that part of the loan could be paid off by the deceased person’s estate or their life insurance, where applicable.

Could I remortgage a tenants in common agreement in this scenario?

Yes, potentially. To be a sole owner with a tenancy mortgage in the event of the other owner’s death, the surviving owner would need a fresh mortgage assessment to ensure they could afford to pay and were eligible alone. If not, the property may need to be sold.

As ever, we are happy to discuss these issues with you and if you want to remortgage in such a situation, make an enquiry and one of the expert brokers we work with will be in touch.

Lenders are generally understanding when a property owner dies, and will give you time to determine how to move forward.

For more information see our article which explains more about mortgages and death, alternatively speak to one of the experts we work with...

Speak to a mortgage expert

If you’re looking for a mortgage and aren’t sure which ownership setup you should go for, or just want to make sure you get the right advice on anything in particular, give us a call on 0808 189 2301 or make an enquiry.

We’ll introduce you to one of the whole-of-market brokers we work with for free. With their help, you can make an informed decision on the mortgage type you need and save time and money along the way. There’s no obligation and we won’t leave a mark on your credit rating.

Updated: 8th November 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.

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