One of the defining characteristics of the mortgages and housing market is how hard it can be to access it. Especially today, getting yourself a spot on the property ladder can seem like an increasingly unlikely prospect. Securing a property requires you to expend a considerable degree of time, patience, and of course money for a sizable mortgage deposit. This can make the experience of obtaining a house understandably quite frustrating and stressful, whereas it should rather be pleasant and satisfying.
However, on the flipside, the field of mortgages is expansive and consists of an array of options that lend you a distinct level of flexibility. For instance, people tend to gauge their eligibility for a mortgage on individual terms, i.e., what they themselves as a single person can afford. Yet, people have the choice of sharing the monetary responsibility inherent in all mortgages, effectively making the entire process more financially feasible. These solutions are what’s known as joint mortgages, and they for good reason represent one of the most common ways for prospective homeowners to achieve a housing placement.
This being said, the present amount of variety regarding mortgages and housing comes with an intrinsic pitfall. That is, it can be singularly difficult to comprehensively evaluate your options before coming to a decision which is wholly right for you, especially when you’re trying to simultaneously carry out a normal life. On the back of this premise, we strongly recommend that you hire the services of an expert mortgage broker to thoroughly assess your personal situation and individual circumstances in order to match you with a lender who can provide you a suitable deal, a deal designed to benefit you specifically. We at The Mortgage Genie have assisted plenty of our UK clients by securing a joint mortgage for them, as well as by handling all the complicated administrative duties involved. If you’re interested in having a stress-free mortgage experience by joining those among our success stories, then be sure to reach us at 01915809890 today.
Though, despite what we can do for you, we still firmly suggest that you get to grips with all the important details concerning joint mortgages before you come to a decisive conclusion. So that you can assimilate the matter, we’ve put together this piece which covers all of the salient details and information you should know. We’ll go over:
What is a joint mortgage?
A joint mortgage is one where two people take out a mortgage loan together. As opposed to single borrowers, the individuals taking out a joint mortgage together have equal responsibility for the property and equal share in it.
Albeit, there are some lenders out there willing to offer a joint mortgage to more than two people. It’s usually the case that couples, whether they are unmarried, married, or in a civil partnership apply for a joint mortgage to distribute the effort fairly.
How do joint mortgages work?
For the most part, joint mortgages work similarly to standard residential mortgages where you borrow money from a lender in order to buy a property. Thereafter, you begin to make monthly repayments towards the loan over an agreed-upon set period, often between 20-30 years. Once you’ve paid the amount in full, you’re considered to be in legal possession of the house.
Although, with a joint mortgage, the main difference is that each individual makes repayments every month, and you have to decide on how to split the share. This doesn’t have to be a 50/50 ownership arrangement, but this is typical. Followingly, if one person fails to keep up repayments, the other will have to cover them. As such, joint mortgages embody a serious financial relationship.
There are two ways you can distribute the shares of a property with a joint mortgage:
Joint tenants - everyone involved has the same rights over the home, and so any profit made in selling is split equally. Essentially, two people together act as a single owner; a favourite option for couples.
Tenants in common - everyone involved owns a separate percentage of the property. Shares can be distributed differently and are indicated by a solicitor’s deed of trust; common when buying with friends or family.
How much can you borrow with a joint mortgage?
As a general rule, lenders typically allow you to borrow up to 4x your annual income. In instances of joint mortgages, you are entitled the privilege of having everyone’s individual incomes combined, meaning you can borrow a lot more than if you were applying on your own. For example, if a couple wanted to buy a house and each made £30,000 a year, then it might be possible to take on a loan of £240,000.
Likewise, you can both pool together separate savings for a large mortgage deposit. In essence, making it substantially easier to get onto the property ladder. Moreover, if one person can realistically afford the mortgage repayments alone, then this gives the lender financial flexibility. And so, all these facets imply that getting your hands on a home is more accessible if you apply with a joint mortgage.
One thing to note is that if you’re taking out a joint mortgage with more than two people, then the majority of lenders will only factor in the two highest incomes for affordability purposes. See how much you could borrow up to today by using our mortgage calculator.
What is a joint borrower sole proprietor mortgage?
A joint borrower sole proprietor mortgage (JBSP) is a particular type of joint mortgage. It is where two individuals agree to have equal responsibility for the mortgage repayments, but only one person has legal ownership of the property.
JBSP mortgages are most common in cases of a parent assisting their child with mortgage repayments. Subsequent to the initial mortgage term, it may be possible for someone to switch to a new deal in their name only if they can now afford it themselves. Only select lenders offer this mortgage type, and each party is liable to cover missed payments.
Can I get a joint mortgage with friends or family?
Yes, you can get a joint mortgage with friends or family members. Including yourself, a lot of lenders provide joint mortgages for up to four people. However, before jumping into such a deal, it’s significant that you all discuss how it should be arranged. Namely, how much will each person contribute towards monthly repayments, how will the equity of the home be divided, and what will happen if one of you loses their job or decides to leave the deal? These are all fundamental questions that should be extensively settled beforehand.
Another caveat, regardless of whether you’ve come to a joint tenants or tenants in common decision, is that it’s vital for everyone concerned to be transparent about their financial health. This is because every party will be subject to a hard credit check. In addition to an affordability check, all lenders carry out hard credit checks as part of their eligibility assessments to ensure that all candidates are certain to be able to comfortably afford the entailed monthly repayments.
This specific check will reveal the quality of your credit score, as well as if you’ve ever had bad credit, a court county judgement (CCJ), an IVA, or if you’ve ever failed to meet payday loans or claimed bankruptcy in the past. The presence of any of these on someone’s report will have a negative influence on the overall application and might cause lenders to reject you, even if this refers to just one of the applicants. After all, if one person can’t fulfil their monthly payments, it’ll be up to the others to take corrective financial action. That being said, if these instances occurred more than six years ago and you have access to a decent mortgage deposit, then their severity will be reduced.
It’s notable that hard credit checks leave a mark on your profile. As such, if you want to get a view of your current credit history before you apply for a mortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to discern any potential mistakes or fraudulent activity on your profile, so that you can deal with such problems quickly and effectively. The trial and subscription can be cancelled at any time.
Can you transfer a joint mortgage to one person?
If you’ve taken out a joint mortgage, but since ran into unexpected circumstances, then you might wish to transfer the mortgage to one person. For example, if you’ve split up with your partner but both your names are on the property deeds. Of course, this also applies if you’ve bought a home with a family member or friend but you’ve fallen on bad terms, one needs to move away, or is unable to work.
There are two principal options in such cases, the easiest being to sell the property and divide the proceeds fairly, i.e., based on how much each of you contributed over the months/years. Or instead, if finances allow for it, one person can buy the other out and cover the repayments solo. For the latter, this can be more complex because the buyer has to meet the lender’s eligibility criteria for a single mortgage, and if this isn’t viable, then you’ll have to extend or remortgage.
If someone on the loan was to die, their share would be paid by insurance. But, if they left this share in their will, according repayments would still be expected.
Pros of joint mortgages
Buying with another person is an easy way of getting your foot on the property ladder, relative to purchasing alone.
Multiple savings means a larger mortgage deposit, entitling you to products with lower interest rates.
Extra fees and charges like stamp duty and solicitor costs, as well as household bills, can be split more manageably.
Cons of joint mortgages
You have to think carefully about the best method of legally splitting up the joint mortgage.
You’re required to think about the right course of action for if someone misses the monthly repayments which they’re responsible for.
A sense of trust needs to be established between each buyer, given that initial purchasing circumstances can change rather quickly.
How to apply for a joint mortgage
For the most part, the process involved in applying for a joint mortgage is the same as if you were applying on your own. Albeit, as we’ve illustrated, there are a lot more secondary deliberations that must be made.
Further still, there’s an increased range of optionality in terms of the contractual arrangement. This is where it becomes integral to have a mortgage broker at hand to inspect your personal situation and individual circumstances, so that the impact on everyone is minimised if things go awry.
Here at The Mortgage Genie we have an in-depth understanding on how to get a mortgage and are committed to helping people secure loans of all types, including those for joint mortgages. We sincerely hope that this piece has given you a comprehensive outlook and cleared up any misconceptions surrounding joint mortgages.
Every day we aid an increasing number of people in achieving housing happiness by finding the mortgage package which is right for them, one that’s tailored to their specific requirements, all while guiding them through the entire procedure. If you’re in need of a team of expert mortgage brokers, then be sure to get in touch with us at 01915809890 and we’ll set you on the journey towards owning your dream house!