Joint mortgages

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What is a joint mortgage?

It’s a type of mortgage that between two and four people can take out to buy and own a property together.

Usually, it’s a mortgage taken out with a partner or spouse. But you can also have a joint mortgage with a friend, parent, or other family member.

Joint mortgage holders share the responsibility for making the monthly mortgage repayments.

Joint holders can have an equal share in the property or differing percentages of ownership, usually according to how much each person has invested into it.

It’s important that you define your rights and responsibilities with a joint mortgage and look into how you can protect your interests.

Joint mortgages

Is it better to have a joint mortgage?

It depends on your circumstances. You’ll need to take a few things into account before applying for a joint mortgage.

  • Pros

    • Pooling savings with another person for a bigger mortgage deposit means you’ll need to borrow less and will have lower monthly repayments, or you may be able to afford a larger home in a desirable location
    • Lenders take into account both of your incomes on a joint mortgage application. This should boost your borrowing potential, so you’ll be able to afford a larger mortgage than if you took one out on your own
    • A joint mortgage might be the only way you could afford to get on the property ladder
  • Cons

    • If one of the joint mortgage applicants has a poor credit score, your application could be rejected. This will have an impact on your own credit rating, too
    • You need to be confident a joint applicant is trustworthy and reliable. If they stop putting money towards the mortgage payments, then it’s up to you to cover the whole amount

Who can take out a joint mortgage?

Both married and unmarried couples can have a joint mortgage.

In addition, sometimes friends or family members might take out a joint mortgage to split the costs of living together.

You don’t all need to be living together to have a joint mortgage either – for instance, a parent might help their child buy a home by becoming a joint mortgage holder, even when they don’t intend to live in the property.

However, some lenders will require all borrowers to live at the property, so you might need to speak to a mortgage adviser to find products that are suitable for your situation. Some advisers charge a fee, but fee-free advice is available.[1]

Another common scenario is for several people to take out a joint buy-to-let mortgage, as a business partnership.

Legal agreements: Joints tenants vs tenants in common

Whether you enter into a joint mortgage as a couple, a group of friends, or as part of a business venture, you should make sure you have legal agreements in place that protect everyone’s interests fairly.

You can jointly own property as either joint tenants or tenants in common and these two types of ownership define what happens with the property if your relationship breaks down, or someone dies.

Joint tenants

As joint tenants, each owner named on the deed has an equal right to the property. If one owner dies, the property automatically passes on to the other owner or owners. This is known as the right of survivorship, and it means you can’t pass on the property in your will.

This option is most common for couples who want equal ownership of a property.

Tenants in common

If you opt to be tenants in common, each homeowner owns a different percentage share of the property.

This is useful when buyers contribute different amounts at the outset or contribute unequal amounts to the mortgage each month.

In the event of one of the property owners dying, their share doesn’t automatically pass on to the other owner or owners. Instead, the share will form part of the deceased’s estate.

If a tenant in common wants their share to pass to the other owner or owners, they should specify this in their will.

Couples usually choose a joint tenancy, but there’s no reason why they can’t opt for a tenancy in common instead. They might do this, for example, so that their share passes to children from a previous marriage if they should die, rather than to their partner or spouse.

If you choose to be tenants in common, you’ll usually need a declaration of trust drawn up.

A declaration of trust is a legally binding document that outlines who owns what, what each party has contributed and how the property will be divided in the event of a separation, sale or death.

Joint tenants can also have a declaration of trust drawn up to control how the joint tenancy can be severed.

Without one, anyone under a joint tenancy can independently sever it at any time, so that the property is then held as tenants in common and the tenant can then leave their share to whoever they wish.

A joint mortgage with tenants in common is more usual when you’re buying a property with friends or family.

Cohabitation agreement

Co-owners of property can also ask their solicitors to draft a cohabitation agreement. This covers who is responsible for things like bills, living expenses, home maintenance and possessions such as furniture.

How much can you borrow with a joint mortgage?

In most cases, lenders will allow you to borrow four times your combined salaries - though some will go higher than this.

Mortgage calculator >

How to compare quotes for a joint mortgage.

To compare quotes for a joint mortgage, we’ll need to know a few things, including an estimate of the property value, how much deposit you’ve saved up and how long you want the mortgage to run for.

Leaving a joint mortgage

Circumstances can change and there could be instances when one party wants to leave a joint mortgage, or a partner passes away.

If the person you have a joint mortgage with dies and you were joint tenants, then as the surviving partner, you inherit their share of the property. If there’s no life policy in place to cover the mortgage debt, then you’ll be responsible for the remaining mortgage repayments.

You may need to remortgage or sell the home if you can’t afford the repayments on your own.

If you split up with your spouse or partner, then there are a few options.

You could sell the property and divide the proceeds.

Or, if you can afford the repayments on your own, you could choose to stay in the property and buy out your partner. You’ll need to contact your lender and they’ll want to do an affordability check to be sure your income is adequate to keep up with the repayments.

If someone wants to leave a joint mortgage where you have a tenancy in common and can’t agree on how the house value should be divided, you may have to go to court, which can be extremely costly.

If the remaining mortgage holder/s intend to stay in the property, a remortgage may be necessary to cover the cost of the outgoing borrower’s share of the mortgage.

Valuation

If it’s decided that the person leaving the mortgage should have a share of the equity built up in the property since it was purchased, a valuation will probably be necessary.

This could go either way - if the property value has fallen, they may have to leave with less than they put into the property.

Solicitors

You’ll usually have to engage a solicitor to handle the removal of the leaving party from the mortgage and from the property deeds. If you have a declaration of trust, it may need to be redrafted to omit the leaver.

Mortgage

Be aware that your mortgage lender is likely to charge for any amendment to the people named on the mortgage and deed. The remaining holders may also need to have their affordability checked again to make sure they can still afford the mortgage with fewer people contributing.

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