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Mortgage with multiple applicants

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By Pete Mugleston   Mortgage Advisor

Last updated: 23rd August 2018

We’re regularly asked about getting a mortgage with multiple applicants, primarily how many people can be on a mortgage? So, we’ve produced the following guide to provide the most relevant info and answer as many questions as possible!

Thankfully there are lenders that will allow up to 4 applicants on a mortgage, and in the right circumstances, will allow all 4 incomes to count toward the monthly payments.

The benefit of buying with multiple person mortgage

You may have more deposit together

It’s possible for more than two family members or friends to club together to combine deposits and incomes in order to raise a bigger mortgage than any one of them could hope to on their own. That elusive thing of buying a property therefore becomes achievable. And because collectively you may be able to raise a greater deposit, the ‘loan-to-value’ (LTV) ratio will be more attractive, meaning you may be able to apply for mortgages with more attractive interest rates.

Combined incomes help make payments more affordable

Monthly repayments of a mortgage that would seem daunting for a single buyer to meet are made much more affordable with a multi-person mortgage.

You may be able to borrow more together

Mortgages for multiple applicants are based on an income calculation which works on the same basis as applying on your own. So, if you earn say, £30k and could borrow up to 5x income alone, your mortgage would be capped at £150k. Adding 2 other applicants earning the same would be combined income of £90k, which at 5x income would offer a max loan of £450k.

Consider joint borrowers that are not on the deeds and don’t own the property

This is known as a “joint borrower sole proprietor (JBSP) mortgage”, in which an applicant on a low income and/or without sufficient funds to raise a deposit is supported by a family member or a friend.

The supporter contributes but doesn’t live in the same property and doesn’t appear on the title deeds to the property.

The JBSP mortgage is aimed at bridging the gap between salaries and property prices, especially for first time buyers. As such, it’s gaining popularity as a mortgage option.

The applicant thus benefits from gaining greater borrowing capacity to buy a bigger or better quality home, or to enable them to afford one in the first instance. Sometimes the arrangement is set up until the applicant is able to earn enough to take on the mortgage on their own.

With a JBSP, the family member’s income is used by the lender to assess the case, but their name is not added to the new property’s title deeds (the document showing the property’s ownership). This arrangement works well for parents who own their own home and want to avoid being hit by the increased stamp duty that would apply if they were to appear on the title deeds. As a non-legal owner, though, they won’t be entitled to any gain in the property – whether that is via rental yield or property value.

It should be noted that if the relationship between the two parties breaks down, the supporter (the non-legal owner) may find it difficult to have their name removed from the mortgage. It would be unlikely that the legal owner could afford the mortgage on their own, so the non-legal owner could be faced with a lengthy and costly legal battle.

Make sure you speak to one of the specialists we work with, who know which lenders to apply to for a JBSP.

Maximum number of applicants on a mortgage

The terms on how many applicants can be on a mortgage varies from lender to lender. There are a number of lenders that will lend to two applicants, not only to married couples or couples in a civil partnership, but also to friends buying together who will both live in the property. Some lenders will lend to joint buyers where only one lives in the property (as in the JBSP arrangement discussed, above). This works well if you’re looking for  3 or 4 family member mortgage.

There are some lenders that will accept a mortgage for 3 applicants, though a good number will provide a mortgage for 4 people. There aren’t as yet any lenders who will lend to more than four applicants.

Who can be on a joint mortgage?

If the question is, can you have more than one person on a mortgage? Then the answer is ‘yes’.  3 People can apply for a mortgage, although lenders vary in the conditions they insist upon. Some will accept third and fourth applicants if they are close family members, whereas some are happy for them to just be friends, so 3 friends can get a mortgage with you.

Others may stipulate that all four applicants must reside in the property (that is their main residence, in some instances); that there must be a family tie between applicants; or that the loan is less than 80% loan to value (i.e. the applicants must together provide a 20% deposit).

Make an enquiry and we will have one of the specialists we work with, give you the best advice for your particular situation.

Using income from 3 or 4 applicants on a mortgage

When it comes to how many people can share a mortgage, some lenders will lend to a maximum of 4 applicants on a mortgage; but consider only an affordability assessment of the two highest income earners when determining the maximum loan amount. With some, this may be the policy when lending to 3 applicants only, and a handful of specialists can consider all 4 applicant incomes.

Calculating the maximum loan affordable with multiple mortgage applicants

A mortgage with three people

If you’re looking for a mortgage for 3 people or more, this can be tricky to calculate, due to the fact that every lender is different and they all calculate loans based on their own affordability models and this determines how many people can get a mortgage.

This is why it’s vital that you’re speaking to the right broker – they know who will offer the highest maximum loan, so if you’ve been declined on affordability, don’t worry – there may well be other lenders happy to consider a joint mortgage with 3 applicants or more.

Most lenders have a cap on lending at 3 and 4 times income, although there are a few who may go as high as 5 or even 6 times combined income. However, when you reach 5-6 times income level, most lenders are less likely to consider all the applicants’ incomes.

Below is a three person mortgage calculator example to give you an idea how income multiples might affect your borrowing levels.

Suppose, as a single mortgage applicant you have an income of £25,000pa, then the maximum loan from a lender who offers 4 times salary is £100,000.

But a joint three person mortgage, may be capped at 3 times salary.  So with a combined incomes of £25,000, £30,000 and £18000 (£73,000), the maximum loan for a three way mortgage would be £219,000.

How to get a mortgage for 4 people

This is much the same as for a 3 person mortgage, except that you may have a higher income and deposit pot. While there are some lenders who will accept four people on a mortgage, only a few will accept incomes from all four applicants.

The advisors we work with know who they are, so why not have a chat today. There’s no charge from us and it won’t leave marks on your credit rating.

How to split ownership of a property with multiple applicants

If you wish to buy equal shares of a property with others, you are collectively known as ‘joint tenants’. Joint tenants are seen legally as a single owner with equal rights in the property.  This means that:

  • If you decide to sell up the property, you will share the proceeds equally.
  • In the extreme case of one tenant dying, the other borrowers would inherit the deceased’s share of the property.
  • If one tenant decides at some stage that they want to move out, they can sell their share of the property. In this instance, the other tenants can either buy up that share outright or if they need to borrow money in order to do so, they will need to extend their mortgage. The ability to do this will rest with the applicants’ mortgage company, who will assess whether the remaining applicant or applicants can afford the higher mortgage repayments.

If you take out a mortgage where each of the applicants have a pre-defined share in the property, you are collectively known as ‘tenants in common’. You will all legally own either equal shares or a percentage of the property to be agreed upon. The legal document specifying the percentages owned by each of the applicants (drawn up by a solicitor) is called a ‘Deed of Trust’.

The same rules apply as they do for joint tenants should anyone want to move out and sell their share of the property. At some time in the future you may all decide to sell up and split the proceeds of the sale of the property between you according to the percentages agreed upon in your Deed of Trust. Or you can sell your share of the property separately or even grant it in a will.

Be aware that while you’re in a joint mortgage, regardless of being joint tenants or tenants in common, your credit record can be affected and that will influence how a lender will view you in future. So, if any of your fellow borrowers have bad credit, you may be seen by association as someone who would struggle to make repayments on a loan. Lenders are also deterred by late or missed mortgage repayments, and other credit issues in general, such as defaults, CCJs, debt management, bankruptcy etc.

Family mortgages

A family mortgage may either be for:

  • Those looking to secure a mortgage if deposit is an issue (it’s possible to take security over family member’s equity in a property or savings in a bank account).
  • Or for those referring to when it is a group of family members buying or mortgaging a property together

Family helping with deposit

The second option is a ‘family offset mortgage’ or ‘helping hand’, as some lenders call it. The buyer is usually required to put in some deposit (5%), which can also be gifted, and the family member saves money (say, 15-20%) into an account, which is linked to the mortgage. Meanwhile, the money cannot be accessed. The money saved is a grub stake, a deposit to help you obtain a mortgage with a lower interest rate (since the savings will be deducted from the value of the loan). This type of arrangement can be attractive to parents whose child is buying a first property with multiple applicants.

If there’s a dispute later between multiple applicants and they no longer want to house share, the parents’ money cannot be taken by the other parties. They will retain ownership of their funds. They do though need to save money that is locked up for an extended period, usually a set number of years, or until their mortgage is 75-80% of the property value.

Family buying together to help with affordability

There are a few ways that family members can help you out with a mortgage if you can’t afford to buy the home you want on your own, these include:

Guarantor

The first option is a ‘guarantor’ mortgage. Here, the family member is acting as a guarantor on the debt if for any reason you can’t meet the mortgage repayments. The guarantor will need to have a substantial amount of equity in their home in order to do this – equity being the proportion of their house they own taking into consideration its market value and the amount they still owe paying off their own mortgage. Usually they will need 25% equity. Equally, if you keep up your repayments, your family member will have nothing to pay.

The risk for the family member exists if you are unable to meet your repayments and you default on the loan. They will be liable to pay and in order to do so they might need to re-mortgage their home. In the worst-case scenario in which they are unable to pay, their home might be repossessed.

Standard joint mortgage

This is literally where the buyer and family go on a normal mortgage together, sharing the ownership of the property and liability for the mortgage. It can be simpler to setup and the family will of course share in any gains or losses. This setup can cause issues with older family members because the maximum term or age that lenders are willing to offer can reduce the length of the mortgage making repayments unaffordable; or stretching what the borrower would prefer to spend had they been able to obtain the mortgage alone. When this happens it’s an idea for borrowers to consider an alternative setup.

Joint borrower sole proprietor

As mentioned above.

Mortgage with friends

How many applicants can you have on a mortgage

It’s of course possible to buy a property with friends, and generally the same rules apply as for any other buyer, although the lender may determine how many people can you put on a mortgage.

This is therefore applicable to those who:

  • Want to add friends to their mortgage to improve the chances of approval (affordability, deposit, credit history etc.)
  • Want to buy together for a shared house to live in

If you’re buying with friends and putting in different amounts of deposit, then it may be important to consider protecting your investment in the property.

Buying as tenants in common

We have an article detailing the differences between ‘joint tenancy’ and ‘tenants in common’, and the benefits of tenants in common, meaning that borrowers are able to specify the % of the property they own. All applicants will still share joint and several liability for the mortgage however.

The impact of deposit source on a multiple applicant mortgage

With a lot of lenders, deposits need to be from the people on the mortgage. If someone is gifting a deposit that’s fine, but lenders can restrict who this is – direct family are usually the only relationship that is widely accepted. Some lenders however, are happy with more distant relatives (cousins, uncles, nephews etc.), business partners or friends, so you can have 3 people on a mortgage.

Lenders will allow gifted deposits from family members which you can add to your own savings and any contributions you might acquire from a Help to Buy scheme. Who the lender will approve of as a provider of a gifted deposit varies but follows a distinct pecking order. Most lenders will accept a deposit gifted by parents, then in order of less likely relatives they will accept from: grandparents; brothers and sisters; uncles and aunts; extended family. There are very few lenders who will consider a gifted deposit from friends, although it is possible.

If someone is gifting a deposit and living in the property, without being on the mortgage, almost all lenders decline with a few specialists the exception.

Multiple mortgage if one applicant has bad credit

Generally, applicants are as quick as the slowest wheel i.e. if one has bad credit and the other clean, the bad credit still counts.

Suppose you have 3 applicants on a mortgage and one of them may have had credit issues. This means you may end up paying a slightly higher interest rate, but this depends on the severity and how recent the credit issues are. Interest rates and mortgage deals for those with credit issues are extremely competitive currently, and many people are surprised by how attractive the rates are.

That said, some borrowers may still benefit from applying in sole name, particularly if issues are more severe and they are ineligible as a result.

As well as considering all of the multiple applicants’ credit scores, lenders will consider all of your incomes, your debt-to-income ratios and the size of deposit you are able to accumulate.

There are various categories of bad credit. These include late payments; CCJs (County Court Judgements – issued so that lenders can claim money they haven’t been paid); defaults in payment; bankruptcy; and several others. We cover various forms of bad credit and how to deal with them here.

Lenders regard people with bad credit as a higher risk in terms of being able to make repayments and as such they will offer them mortgages with a higher interest rate. However, a person with a bad credit can redeem themselves in the lender’s eyes if they can keep up repayments over a few years, mend their poor credit rating and earn themselves a switch to a standard mortgage with a lower interest rate.

If one of your fellow applicants has bad credit, your overall credit score can be raised by others who have clean credit, though perhaps not enough to put you in a position for you all to borrow from a lender under the most favourable terms.

One solution is to ask for support from a co-borrower with a high income and good credit to come in on the loan. This could be a family member, as discussed earlier. Again, the co-borrower needs to be aware that they are responsible for any missed payments and that their beneficiary’s bad credit can in turn affect their own credit ratings.

It may be worth considering mortgage without the bad credit applicant and adding them on later.

Multiple applicants on a mortgage if self-employed

In general, lenders consider the following criteria when it comes to self-employed borrowers:

  • Trading history (most lenders require 3 years accounts, some accept 2, some 1, a handful can consider 9 months if supported by the accountant).
  • Trading style (Lenders will judge your trading history on different criteria depending on your business structure, and consider different accounting figures if sole trader, partnership, Ltd company to establish affordability)
  • In general, if your income is on the up, your average income will be calculated from the last two or three years (although some will consider the latest years’ figures). However, if your income has gone down, they will usually look at the latest and lowest figure.
  • If you’re a limited company director, your income may be assessed based on your salary and any dividends from the business. Alternatively, it may be based on salary and retained profit in the company.
  • If you’re a contractor working on a day rate, the lender will multiply this rate by the number of working days in the year. They will consider at least a year’s contract history.
  • Change of trading style can be considered sooner than 12 months (i.e. if employed and recently self-employed, or if sole trader and recently Ltd company).
  • There are a handful of lenders that will lend to self-employed applicants who have zero years trading history. Under certain circumstances where the applicant has bought an existing business, is joining an existing trading business as a partner, or the applicant’s situation has not changed effectively, such as a doctor moving from the NHS to set up a private practice. Or if you have changed your business structure but it’s the same business essentially i.e. changing from being a sole trader then incorporating your business.

Multiple applicants a BTL mortgage

How many people can apply for a mortgage depends on the lender. Some lenders will lend to multiple applicants, such as a mortgage between 3 people, or more, seeking to purchase a Buy to Let property. As with multiple applicants buying a residential property, there are a number of lenders who will lend to a maximum of four applicants. Similarly, some will consider only the income of two applicants, whereas a small number can consider a 3 person mortgage or even up to 4 applicants.

Tax implications of buy to lets

Changes in tax relief offered to Buy to Let landlords in 2018 is decreasing each year until 2020 when a new system will replace it. Instead of paying tax only on the difference between rental income profits and your mortgage interest payments, in 2020 you will only be able to claim relief on 20% of the interest payments. If you’re earning a salary as well as earning an income through a Buy to Let property, your total incomings might push you into the higher tax bracket. The 20% tax relief may well represent a severe reduction in benefits you would have enjoyed under the old system.

Ltd company buy to lets with multiple applicants

It is possible for multiple applicants to set themselves up as shareholders in a limited company for the purposes of reducing the amount of tax you will pay as Buy to Let landlords. Instead of paying income tax as an individual, a limited company pays corporation tax, which is currently set at 19%. In theory, you should be able to continue to declare rental income after deducting the mortgage. However, a good deal of research is required or advice sought as even this tax saving could result in you ending up significantly worse off.

If anything in this article is of interest to you 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: 23rd August 2018
OnlineMortgageAdvisor 2018 ©

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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.

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