What is a Joint Mortgage?
A joint mortgage is a mortgage that is shared between two or more people. You can apply for a joint mortgage with anyone you choose – your parents, partner, best friend or housemate.
The main reason people choose a joint mortgage is that by teaming together you can usually secure a bigger mortgage than you could if you got a mortgage by yourself.
Also if you have both been saving for a mortgage deposit you can combine these together. Having a bigger deposit also increases the number of mortgage products open to you.
Think carefully before you commit to a joint mortgage because it does mean that you are both liable to pay the mortgage. If your friend, family member or partner defaults on their mortgage payments you will still be liable to cover the entire monthly payment.
Having a joint mortgage means you are jointly responsible for the property. So if you want to do anything to the property, for example sell it or remortgage, then all parties on the joint mortgage must agree to it.
Who Can Get a Joint Mortgage?
You can choose to apply for a joint mortgage with anyone you like, however if the person you choose has a bad credit rating this could affect your chances of having your mortgage approved.
Joint mortgage applicants do not need to be married or family members. Below are some examples of the sort of people who might choose to team up for a joint mortgage:
- A couple (married or unmarried) who wish to buy and live in a property together.
- Siblings who want to keep the family home after the death of their parents.
- Parents who might want to help their child onto the property ladder.
- Child who might want to help out with their parent’s mortgage.
- Business partners who want to invest in a property together.
Can You Get a Joint Mortgage with More Than One Person?
Some lenders only allow two people to get a joint mortgage together. However a number of lenders will include three or even four people on a joint mortgage.
Lenders tend to only take into account the income of the two highest earners in a joint mortgage, so unfortunately you can’t bundle together with three friends and combine all your incomes to secure an enormous mortgage! However, further people can still be named on the mortgage, make monthly contributions and add to the deposit.
How Does a Joint Mortgage Work?
A joint mortgage basically means that both parties have their names on the mortgage and are equally responsible for paying off the debt.
When you apply for a joint mortgage you can specify how the equity in the property is to be split and also you can decide how much each party will pay towards the mortgage each month.
Usually a joint mortgage will be split 50/50 with both parties paying half of the mortgage payments each month and owning half of the property.
However the monthly payments and equity split can be organised however you choose. For example some people might opt to get a joint mortgage with their parents but not require them to pay anything towards the monthly repayments.
It is very important to remember that with a joint mortgage both parties are responsible for repaying the debt, so if one party defaults and does not pay their share the lender might pursue you for the full amount.
What Are the Different Ways Ownership Can be Organised in a Joint Mortgage?
There are two main ways that ownership of the property can be organised in a joint mortgage:
If you take out a joint mortgage as joint tenants then it means that everyone on the mortgage will have equal responsibility for the mortgage and an equal equity split. You will be seen legally as one single owner and will have equal rights to the property.
By opting to be joint tenants it means that should one of you die, the other mortgage holder will automatically inherit the whole of the property.
It also means that if the property is sold at any point then any profits from the sale must be shared equally.
Married couples or those in long-term relationships usually take out a joint mortgage as joint tenants.
Tenants in Common
If you would prefer to legally own separate shares of the property then it is better to take out a joint mortgage as tenants in common.
This means that you can choose what percentage share of the property you each own and it does not need to be split equally.
It also means that you can sell your own share of the property separately and you can leave your share of the property to whoever you like in your will.
Being tenants in common can afford you more financial protection because if you pay more money into the mortgage your share of the equity can reflect that.
To become tenants in common you would need a solicitor to draw up a deed of trust which can specify what percentage of the property you both own.
Friends, business partners or family members are more likely to choose to become tenants in common on a joint mortgage.
How Much Can I Borrow with a Joint Mortgage?
You can usually borrow more with a joint mortgage as you have at least two incomes combined.
Lenders take into account not just your incomes but also your outgoings, credit rating, your age and your expenses.
Joint Mortgages and Credit Ratings
When applying for a joint mortgage both applicants’ credit ratings will be taken into account. This means that both applicants will need to meet the lending criteria set by the lender.
If one applicant has a poor credit rating then it will affect your chances and so it is worth discussing your options with a mortgage advisor as in some cases it might be more prudent to apply for the mortgage by yourself.
Can a Joint Mortgage Affect my Credit Rating?
It is important to remember that when you take out a joint mortgage you will by tying your financial records to someone else’s. This means that in future when you apply for other credit, for example a loan or credit card, the lender might also look at your financial associate’s record and if their record is bad it could negatively affect you.
How to Get Out of a Joint Mortgage?
What happens if you have a joint mortgage with someone and they die? Or if the relationship breaks down and you want to sell? There are a number of ways you can extract yourself from a joint mortgage:
- One owner can ‘buy out’ the other which then transfers the equity into one person’s name.
- You can sell the home and then apply for a mortgage on a new property by yourself.
- If you split up or divorce then you might come to an agreement to move out but continue to pay your half of the mortgage so your ex-partner can continue to live in the home.
- If you are joint tenants and one party dies then the other will inherit the whole mortgage. If they cannot afford to make the full repayments then they may need to remortgage or sell.
- If you are tenants in common and one party dies then their part of the property will be inherited by whoever they named in their will. The mortgage lender will require the mortgage is repaid by selling or remortgaging.
Pros and Cons of a Joint Mortgage
A joint mortgage can be an especially big commitment because you are relying on someone else to help pay off the debt, so before you commit it is worth considering all the positives and negatives:
Pros of a Joint Mortgage
- By teaming up with another person you can pool your deposits and incomes to secure a bigger mortgage than if you were borrowing alone.
- Sharing the cost of a mortgage and buying a home can make getting on the property ladder much more affordable.
Cons of a Joint Mortgage
- If your co-owner fails to pay their share of the mortgage repayments you will become liable to pay them yourself.
- Decisions about the home need to be taken together so if the relationship breaks down this can become problematic.