How do joint mortgages work?

What is a Joint Mortgage?

A joint mortgage is a mortgage taken out by two or more people to buy a property together.

This could be with a partner, family member, or friend. Joint mortgages are a popular option for those who cannot afford to buy a property on their own, as it allows them to combine their income and borrowing power.

Types of Joint Mortgages

There are two main types of joint mortgages in the UK: joint tenancy and tenants in common.

Joint Tenancy

In a joint tenancy, all parties have equal ownership of the property. This means that if one person were to pass away, their share of the property would automatically transfer to the other owner(s). This type of arrangement is most commonly used by married couples or those in a civil partnership or long term relationship.

Tenants in Common

In a tenants in common agreement, each party owns a specific share of the property. This can be an equal split or a split based on the amount each person has contributed towards the deposit.

In this type of joint mortgage, if one person were to pass away, their share of the property would not automatically transfer to the other owner(s). Instead, it would be passed on according to their will or through the laws of intestacy.

Applying for a Joint Mortgage

Applying for a joint mortgage is similar to applying for a standard mortgage. You will both need to provide proof of income, employment, and credit history.

But, there are a few more things to think about when applying for a joint mortgage.

Affordability

When applying for a mortgage with someone else, the lender will assess the affordability of the mortgage based on the combined income of all parties. This means that if one person has a lower income or a poor credit history, it could affect the overall affordability of the mortgage.

Joint Mortgage Sole Proprietor (JBSP)

A joint mortgage sole proprietor (JBSP) is a type of joint mortgage where one person is the sole owner of the property, but the mortgage is taken out in joint names.

This is often used when one person has a higher income or better credit history, and they want to take advantage of better mortgage rates. In this case, the sole proprietor is responsible for making the mortgage payments, but both parties are still liable for the debt.

This option can be used where a parent wants to support a child to purchase a property.

Benefits of a Joint Mortgage

There are several benefits to taking out a joint mortgage in the UK.

Increased Borrowing Power

One of the main benefits of a joint mortgage is the increased borrowing power. By combining incomes, you may be able to afford a larger mortgage and buy a more expensive property than you would be able to on your own.

Shared Responsibility

With a joint mortgage, the responsibility for making mortgage payments is shared between all parties. This can provide peace of mind and reduce financial strain, especially if one person were to lose their job or become unable to work.

Lower Deposit Requirements

Some lenders may offer lower deposit requirements for joint mortgages, making it easier to get onto the property ladder.

Drawbacks of a Joint Mortgage

While there are many benefits to a joint mortgage, there are also some drawbacks to consider.

Shared Liability

With a joint mortgage, all parties are equally liable for the debt. This means that if one person were to default on their payments, the other owner(s) would be responsible for making up the difference.

Potential for Disagreements

When buying a property with someone else, there is always the potential for disagreements. This could be about the property itself, the mortgage, or other financial decisions. It’s important to have open and honest communication with your co-owner(s) to avoid any conflicts.

Should this result in one party leaving the property, then it may be possible to buy them out, via a transfer of equity remortgage.

Joint Mortgages and Affordability

When applying for a joint mortgage, it’s important to consider the affordability of the mortgage. This includes not only the monthly mortgage payments but also any associated fees and costs.

Stamp Duty

Stamp duty is a tax paid on the purchase of a property in the UK. The amount you pay will depend on the value of the property and whether you are a first-time buyer. Additional costs apply if the property is a second home or investment property.

Our Stamp Duty Calculator can give you an idea on how much this could be.

Legal Fees

You will also need to pay for legal fees when buying a property. These can include conveyancing fees, land registry fees, and search fees. Again, these costs will be split between all parties.

Other Costs

Other costs to consider when buying a property include survey fees, mortgage arrangement fees, and moving costs. It’s important to factor these into your budget when considering a joint mortgage.

Changing borrowers

A commonly asked question is whether a single mortgage can be changed into a joint mortgage.

Yes this is possible, and it is called a transfer of equity.

You would be making a joint application to takeover the existing mortgage, and both parties will then be property owners and named on the mortgage.

Before you start applying for the mortgage, it’s a good idea to seek some legal advice over the best way to make these changes.

How a mortgage broker can help

An independent mortgage broker, like ourselves, can be a valuable resource when it comes to getting a joint mortgage.

Firstly, they will have access to over 100 lenders. 

Your broker can also explain the different types of joint mortgages. This could include:

• Joint tenancy
• Tenants in common
• Guarantor mortgages
• Joint borrower sole proprietor (JBSP)
• Transfer of equity

Additionally, they can guide you through the application process and negotiate on your behalf. Working with a mortgage broker can save you time and effort, ensuring that you find the right joint mortgage for your needs.