Joint mortgages – everything you should know
If you’re looking to buy a property then it’s quite possible that you’ll be buying with someone else. Perhaps you’re buying with a spouse or partner? Are you taking out a joint mortgage with a friend? Or do you simply need a second person on your mortgage to borrow the amount you need?
Joint mortgages are common and let you buy a property with someone else. But how do joint mortgages work? Can you get a joint mortgage with parents? And what happens if you want to end the ‘joint’ arrangement? Keep reading for answers to all these questions and more.
How do joint mortgages work?
If you take out a mortgage with someone else then you’ll be committing to a joint mortgage. The other party could be:
Under a joint mortgage, each mortgagor is usually jointly responsible for meeting the repayments. You decide how you want to share the ownership or the equity in the property.
Who can get a joint mortgage?
Both married and unmarried couples can have a joint mortgage, as well as couples in a civil partnership. You can also get a joint mortgage with one or more friends if you want to share the costs of living together.
You don’t even need to be living with the other party to have a joint mortgage. Sometimes parents take out joint mortgages with their children to help them get onto the property ladder, even if they are not intending to live in the property.
How to get a joint mortgage
The process for applying for a joint mortgage is much the same as applying on your own. The main difference is that you and the other party are likely to have to attend your mortgage interview together. You’ll both need to provide all the documentation and ID that the lender requires, and you will both need to sign any forms or declarations.
If you’re looking for a joint mortgage for three or more people, the choice of lenders may be restricted. Speaking to an independent mortgage broker can help you to find the right lender for you.
How much can you borrow with a joint mortgage?
A major reason that people choose to take out a joint mortgage is because it increases the amount that a lender will advance.
Previously, lenders would have used a multiple of your joint earnings to decide how much they would lend you. Now, they will take your income and outgoings into account in an affordability assessment. Many lenders will offer a joint mortgage calculator on their website so you can work out what you’re likely to be able to borrow.
Bear in mind that, even though a number of lenders will allow four people to take out a mortgage together, most banks and building societies will only take the earnings of two people into account when calculating how much you can borrow. Lenders have their own way of calculating income, so it’s not just a case of adding up salaries.
Can I take out a joint mortgage with parents?
Yes. Many lenders will consider agreeing a joint mortgage between a borrower and a parent. This is generally only possible when the parents are still working, as their income is likely to be needed to support the application.
If the parent has a mortgage of their own then this will need to be taken into consideration when agreeing the new loan. There may also be a limit on the term of the mortgage depending on the age of the parent. Additionally, the new property may be considered a ‘second home’ and so the parent may be liable for Capital Gains Tax (CGT) when the property is sold.
Parents taking out a joint mortgage also need to consider the implications for their credit score. If the child fails to keep up the repayments then it can also affect the credit record of the parent, affecting their ability to borrow in the future.
In recent years lenders have launched a range of alternatives to joint mortgages to allow parents to help their children buy a home. Schemes now allow parents to invest cash with the mortgage lender or use their own home as collateral. A guarantor mortgage is also a potential option – read all about getting a mortgage guarantor in our guide.
Can I take out a joint mortgage with a friend?
Yes. Many lenders will allow friends to apply together on a joint ownership mortgage. Some will even allow three or four applicants, although they may only take a couple of incomes into account when deciding how much you can borrow.
If you’re buying with a friend you need to make sure they have a good credit rating as this could affect your application. You also have to decide how to split both the mortgage repayments and the equity in the property.
What are the different ways a joint mortgage can be split?
There are two ways a joint mortgage can be split:
- Joint tenants – under a joint tenancy, each person has a 100% stake in the value of the property. You will take out one joint mortgage to cover the value of the property, and you must all agree if you want to sell the property. If one of you dies, your part of the property automatically passes to the other owner. Joint tenants typically include married couples and borrowers buying with a partner.
- Tenants in common – as tenants in common you can all own a different share of the property. You can choose who to leave your share of the property to when you die. You must all agree if you want to sell the property, and you will generally have to take out a joint mortgage. Tenants in common typically include friends or family members buying together.
What do I do if the joint mortgage holder stops making payments?
Generally speaking, you are jointly liable for a joint ownership mortgage meaning you have to make all the repayments. You can’t claim that you are paying you ‘part’ of the mortgage as you are responsible for the whole loan.
Mortgage lenders can chase you for the arrears and they aren’t interested in which of you was contributing more towards the repayments.
How do I remove a name from a joint mortgage?
You need to speak to your lender to find out whether you are able to take a name off a joint mortgage. You will have to prove that you can afford the mortgage on your own, particularly if you borrow more money to buy out another party.
Our guide to joint mortgage separation has all the information you need.