Last updated: 23/07/2020 | Estimated Reading Time: 5 minutes
Often when looking to buy a new home you may want to buy with someone else. Whether you are buying a home with your partner, a friend or as part of a group, a joint mortgage can get you a larger mortgage. Our guide will take you through the benefits and risks of buying a house with a partner, friends or family.
In This Guide:
- What is a joint mortgage?
- What types of joint ownership are available?
- Who can get a joint mortgage?
- How much can I borrow with a joint mortgage?
- What should I watch out for?
What is a joint mortgage?
If you’ve decided to live with a partner, friends or family, a joint mortgage can help you buy a property by getting a mortgage in all of your names. This means everyone named on the mortgage will be responsible for making repayments, but it’s up to you to decide how to share the equity in the property, meaning you can decide what percentage of the property each of you owns depending on the type of joint mortgage you apply for. This means you need to know together to make sure you are making the best decision for everyone involved.
Taking out a joint mortgage means owning a property together. It’s a big commitment and so important that you trust your joint owner. It can also be useful to discuss what would happen if one of you is unable to meet the monthly repayments.
What types of joint ownership are available?
Everyone named on a joint mortgage owns the property, however what this means will depend upon the type of joint mortgage you choose. There are two types of joint mortgage available and you will need to decide which suits your needs:
As joint tenants, all borrowers are legally seen as a single owner and have equal rights in the property. This means that each tenant owns the whole property. Usually this option is chosen by long term couples who are buying a home together.
Having equal rights in the property means:
- If you sell the property all profits are split equally.
- If you choose to remortgage the property you will need to get a new mortgage together.
- If one borrower dies then other will inherit their share of the property.
- You cannot leave your share of the property to someone else in your will.
Tenants in Common
As tenants in common you will each legally own separate shares in the property. This option is usually chosen by friends, family members, or business partners buying a property together.
Having legally separate shares in the property means:
- You choose the percentage owned by each borrower and they do not have to be split evenly.
- You can sell your share of the property separately.
- You can leave your share of the property to someone else in your will.
Whether you choose to be joint tenants or tenants in common will depend upon your personal situation. It’s important to decide which type of ownership suits your needs as a pair or group.
Who can get a joint mortgage?
Joint mortgages are usually taken out by couples whether married, unmarried or in a civil partnership. However, you can also buy a home with friends, family members, or even a business partner that you wish to invest in property with.
Usually, a joint mortgage is taken out by two people, but some lenders will allow up to four people to buy together. It’s worth considering that sometimes even lenders who accept four borrowers will only consider two incomes when calculating affordability. This can make it harder to be accepted as a larger group as you may not officially meet affordability criteria for properties of the right size.
How much can I borrow with a joint mortgage?
Taking out a joint mortgage usually means you can borrow more because your combined income will be higher than what you earn alone. If both of you have a regular income, you will be able to afford a more expensive property than if you were buying alone. But as mentioned above, lenders may only take into account the income of two people rather than the three or four of you buying a house in a larger group.
It is worth remembering that joint mortgages come with the same costs as standard mortgages so you will have to pay interest and mortgage fees. However, it’s also easier for you to save for a higher deposit and this will likely give you access to a greater range of mortgage deals. This means you are likely to pay less interest overall than if you were buying alone.
You should also be aware that repayments can be complicated for a joint mortgage. Everyone named on a joint mortgage is equally responsible for making monthly repayments. This will mean that if the other borrower stops paying their part, the lender may pursue you for the missing money.
What should I watch out for?
If you decide to take out a joint mortgage, you are creating a financial link between yourself and the other borrower(s). This means your credit records will be linked. This could be positive or negative for your credit score so you will want to ensure you trust the financial management of the person you are considering borrowing with.
A joint mortgage is a big commitment so you should ensure everyone’s legal interests are protected fairly. This will likely mean ensuring you have legal paperwork and agreements in place. Legal fees can be an extra expense, so you may have to save for those in addition to saving for your deposit and other mortgage fees.