Getting a mortgage can be a big financial responsibility so it’s little wonder that many people decide to take out a joint mortgage with another person. This way, two people are tasked with paying the loan rather than just one and in most circumstances, the debt can be easier to pay off.
If you’re thinking about getting a joint mortgage, we will tell you all there is to know in this guide. But if you have any other questions after reading this or if you would like to get the ball rolling and want to know more about joint mortgages, get in touch with our expert team and we will give you all the support and advice you need.
What is a Joint Mortgage?
A joint mortgage is when you apply for a mortgage on a property with up to three other people. The majority of joint mortgages are between two people, however, there are some mortgage lenders that allow up to four people to buy a property together. Buying together gives them the opportunity to get on the property ladder and take out a potentially bigger loan because of their combined incomes.
Most joint mortgages are taken out by family members, friends, married or unmarried couples, and civil partners.
The people on the mortgage agreement will each have a share of the equity on the property.
They will also be responsible for the monthly mortgage payments. If one person fails to make their payment, the other(s) will need to cover the shortfall.
Read this if you’re looking to get a joint mortgage as a first time buyer.
Who Can Apply for a Joint Mortgage?
A joint mortgage can be applied for in the following scenarios.
1. Married couples
If you’re part of a married couple, most joint mortgage providers will want you to take out a joint mortgage.
This isn’t to say you can’t take out a sole mortgage, perhaps because your partner has bad credit and you’re worried that it might affect your mortgage rates and your credit score.
However, you will have a wider choice of mortgage lenders to choose from if you get a joint mortgage with your spouse.
2. Unmarried couples
A large percentage of couples taking out mortgages today are unmarried. Therefore, you shouldn’t be worried about how your unmarried status might affect your application.
3. With Your Parents
We aren’t suggesting you might buy a property with your parents for the purposes of you all moving in together. This is certainly possible but as most people want to fly the nest, you will likely want your own home to live in.
The most typical case for a joint mortgage in this scenario is when a parent or another family member agrees to help you buy a property. They would accept joint responsibility for making the monthly repayments but they wouldn’t have to move into the house with you.
When taking out a joint mortgage with your parents, you have two joint mortgage options.
- A standard joint mortgage is where all parties have joint ownership of the property.
- A joint-borrower-sole-proprietor mortgage is where the family member becomes equally responsible for the mortgage repayments but doesn’t become a joint owner of the property.
If your parents do want to help you buy a property, guarantor mortgages are another option. With a guarantor mortgage, your parents don’t become jointly responsible for your property but they do agree to cover your mortgage repayments if you aren’t able to pay them for any reason.
Learn more about getting a joint mortgage with your parents.
4. A group of friends
As rental prices are very high in some parts of the UK, it’s not uncommon for a group of friends to buy a house together. This will make life cheaper for everybody, although if you all decide to apply for a joint mortgage, you need to make sure everybody understands their financial responsibility.
You can take out a joint mortgage with up to three friends.
How Does a Joint Mortgage Work?
With a joint mortgage agreement, everybody on the deed accepts joint liability for making the loan repayments. It is sometimes sensible to have a joint bank account to which each person contributes their share of the monthly mortgage cost.
This doesn’t mean that two people living together would be liable for half the mortgage each but they would need to work together to ensure the full mortgage repayment was made each month. The same applies to joint mortgages with more than two people.
There are two types of joint mortgages.
With Joint Tenants, each person would have equal rights to the property.
When you have a joint tenancy if one of the borrowers dies, the other person would inherit their share of the property, even if they had left it to somebody else in their will. Joint tenants are usually most suited for a married couple or a couple in a long-term relationship as there is a joint responsibility.
If the property is sold, both owners would get an equal share of the profits.
A joint tenancy is usually the preferred option for long-term couples.
tenants in common
With this type of joint mortgage, each person named on the agreement would own separate shares of the property.
A solicitor will draw up the ‘Deed of Trust,’ a legal document that stipulates what percentage of the property each person owns. One person could own 60% of the equity, for example, while the co-owner has 40%.
Tenants in common are useful when unequal deposits are made, as it can be decided that one person has a bigger share of the property than the other.
Tenants in common are usually used when friends or relatives decide to take out a joint mortgage together. If one of the borrowers makes a will, they can leave their share of the property value to somebody other than their co-owner, should they wish to.
Benefits of Joint Mortgages
Joint mortgages have a number of benefits.
- They can provide an easy way to get on the property ladder as each party can combine their savings for the loan deposit
- On joint applications, each person’s set of earnings is taken into account by the lender. With a combined income, the buyers could have the opportunity to take out a bigger loan
- A bigger deposit usually equates to lower interest payments
- Home-buying costs, such as the legal fees and stamp duty can be shared
Drawbacks of Joint Mortgages
With a joint mortgage, there are a small number of potential drawbacks.
- If one of the buyers has a less-than-perfect credit history, this could affect how much they could borrow together and it can also affect the other person’s attempts to get credit in the future
- If one person defaults on their mortgage payments, the other would be liable for the shortfall
Joint Mortgage: FAQs
If both you and the other person are still named on the mortgage agreement, you are both jointly liable for the mortgage repayments.
Joint mortgage separation is when you have a mortgage with a partner and but you are looking separate. You will still need to pay your share over the existing mortgage term while the other person pays their share.
However, neither of you has to accept liability of the mortgage for the long term as there are options you could consider.
One option is for you and the joint owner to sell the property. This means you would no longer be financially tied to your ex-partner and they would no longer be tied to you. You could then take your financial share of the property and use that towards your next house move.
Alternatively, you could both rent the property out to others and share the rent payments. This is assuming you both wanted to own the house.
If only one of you wanted to rent out the property, one person would have to buy the other person out of the mortgage. The same applies if only one of you wanted to be named on the title deeds.
Yes. If you want to remove somebody from the mortgage, be that a friend, family member, or a current or former partner, you can replace them with somebody else, such as a new partner, using a legal process known as Transfer of Equity. This can be useful if you are no longer able to meet the monthly repayments on your mortgage after the other person has been removed.
If you and the other person separate, the joint mortgage can be transferred to one person. You can do this via the Transfer of Equity process mentioned above. Your mortgage lender will want to know that the other person can make the repayments on your mortgage before they agree to this and they may have other requirements before they agree to the transfer.
If one of the joint owners does decide to transfer the mortgage to the other, you will need to consult with a solicitor. They will assist with the removal of one person from the loan and from the property deeds. Their legal fees will need to be covered, of course, and there may also be admin fees and stamp duty to pay when transferring the mortgage to one person.
Yes, provided one of the applicant’s income is enough to pass the lender’s affordability checks, you should still be able to get a joint mortgage with both of your names on the agreement. If the unemployed applicant is in receipt of benefits, a percentage of these can be counted as combined income.
Most lenders offer joint mortgages and therefore will accept joint mortgage applications but before you apply to borrow money, it’s wise to speak to a mortgage broker for advice on the best deals on the mortgage market.
As with a standard mortgage, a joint mortgage application can be turned down. This is usually when one partner has a bad credit rating or if the prospective joint mortgage holders fail the lender’s affordability checks.
Before making your application, you should check one another’s credit records in advance. If the score on either credit report is low, it is wise to improve one or both scores to improve your chances of mortgage approval.
You should also make efforts to reduce your spending and improve your income as this will improve your affordability rating.
For more advice, speak to our team of mortgage experts. We have a proven track record of supporting customers whose applications have been rejected. We will talk to you about your situation, advise you on what you need to do to be approved for a mortgage deal, and will put you in touch with a specialist lender if you can’t get a mortgage elsewhere.
When you take out a joint mortgage with someone else, you will become financially linked to them on your credit report. A question often asked is how can a joint mortgage affect my credit score. If their credit rating is low, perhaps because they have a history of defaulting on their credit cards and other debts, their score and yours may be negatively affected.
How YesCanDo Money Can Help
Our mortgage adviser’s observation on joint mortgages is that serious consideration needs to be taken that it works for all parties involved. Our experience shows that the exception to this would is married and unmarried couples. Mortgages are often taken out over a long term and therefore it is essential and our observation that the bond is there with a friend or relative that will survive many years.
If you’re interested in getting a joint mortgage, speak to our team of mortgage experts today.
After getting to know your personal and financial circumstances, your appointed representative will put you in touch with those lenders who offer joint mortgages to people in your situation.
Most high street lenders will consider applicants for a joint mortgage but if it is likely that you might be turned down by them, perhaps because you don’t meet their criteria, we will consider specialist lenders that might be more fitting for your needs.
We will also give you mortgage advice related to the types of deals that are on offer and will point you towards those that will help you save money in the long term. When we have found you the right mortgage, we will support you with your application to improve your chances of mortgage approval.
If you already have a joint mortgage but are looking to transfer it to only one person, we can also advise you on the processes involved.
To learn more, get in touch with a mortgage broker at YesCanDo Money today by using any of the contact details that can be found on our website.