A joint mortgage is where a mortgage is in two or more names. The main advantage is that you may be able to take on a larger mortgage in comparison to having a mortgage on your own. Repayments can be shared, as are the affordability tests that lenders carry out during application. In addition, joint borrowers are often able to place down larger deposits which can secure favourable mortgage rates.
Joint mortgages are common in the following circumstances:
- Married couples
- Cohabiting individuals (friends and family)
- Business partners (buy to let, property investment)
- Civil partners
Each person would undergo the usual mortgage checks. This includes credit checks, income/affordability, expenditure, employment type and proof of UK residency. The same mortgages are available to single homeowners and joint owners (subject to criteria). There aren’t any specific mortgage deals for joint owners.
Important: A guarantor mortgage or a shared ownership property is not the same as a joint mortgage. If you need a joint mortgage, you can make an enquiry with a specialist advisor. With access to every UK mortgage lender, we can find you the best deals within seconds.
How is a mortgage shared?
If you’re planning on sharing a mortgage, then you’ll have two options on how you want to split the ownership. The decision you make will also have an effect on the liability of each homeowner. Nonetheless, each named person on the mortgage is equally responsible for the overall repayment of the loan. Even if you continue to repay your share of the mortgage, but the other sharer doesn’t, you will still be pursued to make payment.
Any changes to your mortgage, such as a remortgage or changing from residential to buy to let would require each owner to consent. A joint mortgage is usually shared between two people, but it is possible to have three or four people sharing a mortgage.
A jointly owned property will fall into one of two categories:
- Joint tenants
- Tenants in common
Your solicitor who is representing you in the conveyancing of your property purchase will usually ask you how you wish to split the ownership. They will also be on hand to explain the differences in greater detail.
- The entire ownership is shared equally
- Any profits made from selling the property are shared equally
- If you remortgage the property, the new mortgage will also need to be in joint names
- Shared owners would inherit the share left behind from an owner that has died
- If you wanted to sell the property, each owner must consent
Tenants in common
- Shares in the property are legally split
- Shares can be split at a percentage of your agreed choice
- The percentage at which shares are split don’t need to be even
- You can leave shares to someone in your will. This doesn’t need to be another homeowner
- Shares in the property can be sold to another shareholder
- Your solicitor will create a deed of trust outlining the share of the property
Advantages of having a shared mortgage
Having more people to share a mortgage with has its financial advantages. We’ve outlined some below.
- Repaying a mortgage with other people can alleviate financial pressure
- Able to place a larger deposit, giving access to the most competitive mortgage deals
- Combined income allows you to borrow more and go for more desirable properties
- Refurbishments and home improvements can be shared financially
- To be more tax efficient (buy to let)
- One or more borrowers may have bad credit – read about joint mortgages with bad credit here
How much can we borrow on a joint mortgage?
As each lender varies on how they assess joint mortgage applications, there isn’t one answer for everyone. The only thing lenders have in common is that they’ll assess the affordability of each person that’s applying for the mortgage. This is to establish how much you can borrow.
Lenders will typically lend up to 4x your joint income, however this does depend on other circumstances such as your credit history. In addition, certain lenders may consider income such as tax credits or bonuses whereas other lenders won’t. There are lenders that may even lend up to 5x your joint income.
Take a look at the example below:
Lender A will only consider the income from your employment. Furthermore, they will only consider your salaried income, which doesn’t include bonuses or overtime.
Lender B will consider all of your total income.
If you went directly to Lender A, you could be selling yourself short and be offered a smaller loan amount which may not be enough for the property you wish to buy.
If you use Lender B, they may offer you the maximum loan amount possible. This is because they’ve included all of your total income, including bonuses, investment income, tax credits, etc.
By using our specialists, you can be sure that the best-suited lenders are approached based on your circumstances. You may not need a huge mortgage and your main priority is to keep your monthly repayments as low as possible. Whatever you aim to get from a mortgage, our advisors can search the entire market for you and present you with multiple options.
Going to the wrong lender could cost you thousands in the long run. Sharing a mortgage with another person is not something to be taken lightly, so getting professional advice is highly recommended. You can make an enquiry below to get started.