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Joint Tenants versus Tenants in Common

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By Pete Mugleston   Mortgage Advisor

Last updated: 25th September 2018 *

We are frequently asked about different ownership types and getting the right mortgage, so have collated this information for everything you need to know:

Getting the right advice for you and your circumstances is crucial to ensure you get the right mortgage and ownership setup, so make an enquiry and we will refer you to one of the mortgage experts.

What are joint tenants?

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

What are tenants in common?

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

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

The number of unmarried couples living together in the UK has soared from 1.5 million in 1996 to more than double at 3.3 million in 2016 – and that’s for a reason.

In London and the South East especially, buying with friends, brothers and sisters can be a necessity rather than a choice, so getting a mortgage as tenants in common can be the best way for those wanting to escape the private rental sector.

People buying together generally have two models to choose from that they need to agree on before taking out a joint tenant mortgage – registering as ‘joint tenants’ or ‘tenants in common’.

It should be noted that despite the term ‘tenant’, this has nothing to do with renting out a property as a landlord. Click here for information about renting to tenants with a buy-to-let mortgage.

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 joint tenancy mortgage, the death of one of the partners 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.

By the same token, the tenants in common mortgage liability, is the responsibility of both parties, so joint tenancy mortgage payments have to be made by both partners. If one partner fails to make the payments, the other must make up the shortfall, or their credit rating will be affected as well.

How do tenants in common mortgages work?

Each owner has their own share of the property, which is called a tenancy in common mortgage, 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 payments.

Joint mortgage 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 may be able to help calculate what your tenants in common mortgage payments or your joint tenancy mortgage payments might be.

For co-habiting 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.

Tenants in common mortgage calculator

Calculating ownership

If you want to calculate your ownership, this is simply referred to on a percentage basis, as outlined in your preferences in discussion with your solicitor, at the point of application.

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 lender considering incomes from all applicants regardless of ownership type or amount.

Calculating costs

If you want to calculate how much a tenants in common mortgage might cost, then its important to know that the rates and deals are the same as any standard mortgage and 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 experts to give the right advice.

Qualifying for a tenants in common or joint Mortgage

Whether a joint mortgage or tenants in common, borrowers must be ‘jointly and severally’ liable to pass lenders’ criteria, meaning 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, commonly 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 and whether or not it will be a joint mortgage for tenants in common.

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 you need to know about getting a joint or tenants in common mortgage

While lenders will allow up to four applicants to take out a mortgage for tenants in common, typically it will only take into account the incomes of the two people who are paid the most, although there are some lenders who will accept the incomes of up to four applicants. Lenders will look at their credit scores, debts, commitments and spending, to establish eligibility.

Notably 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 lender, but there are plenty of options available and the experts we work with are happy to help you overcome such challenges.
Usual lending policy applies, and every lender is different in what they will and won’t accept. In general, lenders will consider:

  • Affordability (most lenders consider 4 x 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)

Clearly therefore, it’s crucial to trust the person or people you’re buying with to sort out how you’d deal with such eventualities. Whatever your situation or requirements, make an enquiry and a specialist will be in touch to give you the right advice.

What is a Declaration of trust?

It’s common for trust to be established in a legally binding way. A declaration of trust can be created with a legally binding 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 case of a sale.

This can be also 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 tenant in common mortgages

Notably, to qualify for first-time buyer stamp duty relief (zero tax on the first £300,000 of the purchase price at the time of writing), all the applicants have to 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 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; while 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 if applicable.

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 experts will be in touch.

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

Speak to a joint or tenants in common mortgage expert

If you are 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 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: 25th September 2018
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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