This could be residential or commercial property, and while more often than not there are 2 applicants, a joint mortgage can have up to 4 applicants.
Contrary to popular belief, it’s not just couples that buy property together. A joint mortgage can be a great way of sharing the financial responsibility of a mortgage with family and friends who choose to live together, or business partners to split an investment, like a buy-to-let property.
How do lenders assess joint mortgage applications?
When you apply for a mortgage with others, lenders will expect all applicants to meet their criteria. All applicants will, therefore, have their income and outgoings, creditworthiness, and personal circumstances assessed.
How does a joint mortgage work?
When you take out a joint mortgage, all applicants are jointly liable for the monthly repayments. This means that if any applicants are unable or refuse to pay their share, the remaining applicant(s) are liable to cover their share. However, when it comes to division of ownership, it depends on the type of joint mortgage you opt for.
Why should I get a joint mortgage?
The most compelling reason to get a joint mortgage is to aid affordability. It’s much easier for first-time buyers to borrow a large amount of money based on 2 salaries than on one. This means it’s more likely that you’ll be able to afford a larger property, or one in a preferred area.
Aside from loan size, it can also be quicker to save a large enough deposit with more than one person financially contributing to it. Although lenders won’t usually consider the income of more than 2 applicants, 4 applicants could potentially provide a deposit together, reducing the size of the loan required. Of course, other mortgage related costs, such as legal fees and stamp duty, can also be shared.
As all applicants are assessed by the lender, some applicants may find it more beneficial to apply jointly. For example, if you have bad credit and are applying with someone who has an exemplary credit history, this can reduce some of the risk in lending to you. However, the opposite is true of the other applicant, which is also worth bearing in mind.
Joint tenants vs. tenants in common
If you take a joint mortgage as joint tenants, then each applicant owns an equal share in the property, whether this is half, a third, or a quarter each. When the property is sold on, each is entitled to the equivalent share of the profits. This is often popular with couples as ownership automatically transfers to the surviving applicant, should one pass away.
The downside is that no individual on a joint tenant mortgage can sell off or remortgage their share separately - which can be more complex when it comes to separation.
The other option is to take a joint mortgage as tenants in common. This allows more flexibility with the division of the property, and allows it to be shared as different percentages. This can be helpful in a business arrangement, especially if one applicant wants to contribute more of an investment than others.
In this case, each applicant can sell off their share of the property if they want to, without the consent of other applicants. However, inheritance is more complex, as each member can leave their individual share in their own will, as they wish.
How is the loan determined for a joint mortgage?
Each lender has their own method of calculating the size of a mortgage loan for joint applicants. If there are 2 applicants, this will either be a multiple of both applicants' combined income (so, for example £50,000 + £35,000 x 4.5) or a multiple of the highest income earner, plus the second applicant’s income (So, £50,000 x 4.5 +35,000).
When there are more than 2 applicants, it can be more complex. Even though some lenders allow up to 4 applicants, very few will consider the full income of all of them. Usually only the combined income of the 2 highest earners will be considered. Although as all lenders calculate this differently, it’s important to speak to a broker to find the right solution for you.
Who can I take out a joint mortgage with?
Given the cost of buying a property in the current financial climate, joint mortgages have become increasingly popular among those keen to get their first step onto the property ladder. With the average property in the UK at around £300,000, there are very few people able to borrow enough to buy independently.
Luckily, most lenders are fairly flexible when it comes to joint mortgage applicants, and any of the following may be possible, depending on individual lender criteria:
- Couples in a relationship
- Relatives such as siblings or cousins
- Friends
- Business partners
- Parents or grandparents and their children or grandchildren
What is a Joint borrower sole proprietor (JBSP) mortgage?
While some people will be open to the idea of living with family, many parents and grandparents would rather keep their own home, while still helping their children. This is perfectly possible with a joint borrower sole proprietor mortgage.
This allows additional applicants on a mortgage to help the sole proprietor (usually the children) to meet affordability and/or deposit requirements, without the need to share their home. While supporting applicants are jointly responsible for the mortgage repayments, they have no ownership over the property and do not appear on the deeds.
Joint mortgage FAQs
Can a joint mortgage be paid by one applicant but owned by more?
It’s absolutely possible for one applicant to repay the entire mortgage, however, this doesn’t mean that the other applicant(s) won’t need to meet the lender’s criteria. Lenders will want to be comfortable that payments could be covered by the other applicant(s) if the person paying suddenly became unable to.
How do you remortgage a jointly owned property?
When you remortgage a joint property all owners will need to be in agreement. On a joint tenancy the entire mortgage would need to be remortgaged together, whereas with a tenants in common agreement, individual owners can remortgage or sell their share only.
