Joint mortgages are pretty much the same as regular mortgages except that there can be up to four different names on the deeds instead of one. You can jointly buy a property with a spouse, partner, friend, family member, or even business partner.
A joint mortgage will inextricably link you financially to one another, so it is not a partnership that should be entered into lightly.
What is a joint mortgage?
A joint mortgage is almost identical to a single mortgage, but instead of just one name on the title deeds (the legal documentation of ownership), there can be up to four.
Joint mortgages are most common between spouses or partners, but you can take one out with family members, friends or even business partners as an investment.
How does a joint mortgage work?
Each person named on a joint mortgage is responsible for making the repayments. Even if one of you decides to leave, the mortgage payments still need to be met, in full, each month. That’s why it is important to think very carefully about who you want to share the mortgage with – you will need to trust them completely.
Generally speaking, you will be able to get a larger mortgage if you have two or more incomes to pool together. Also, by combining your savings into a larger deposit, you should have access to better mortgage rates. Lenders tend to reserve the cheapest mortgage deals for applicants with 25% deposits (a loan-to-value ratio of 75%) or more.
A joint mortgage links you financially to one another, which means that if one of you has a bad credit history, it could impact both of you and affect your chances of securing a mortgage together.
If you are putting in different amounts of deposit, or one person is going to be paying more towards the mortgage repayments, careful negotiation is needed. Be sure to discuss how you would split the proceeds when you eventually sell the property. It’s a good idea to get these details outlined by a solicitor and agreed in writing.
Types of joint mortgage
There are two main types of joint mortgage:
- Joint tenant
- Tenants in common
Joint tenant mortgages are generally most popular with long-term partners because although there are two names on the deeds, you’re treated as a single owner.
You have equal rights to the property (in other words a 50/50 split) and any decision regarding the property must be made together – for instance, if decide to sell. If one partner dies, their part of the property will automatically go to the surviving partner, even if they’ve outlined a different recipient in their will.
Tenants in common
With a tenants in common mortgage agreement, the shares of the property – which do not need to be evenly split – are separate, even though the mortgage itself is joint. As such, tenants in common mortgages are well suited for friends, family or business partners, though of course you could still get one with a spouse.
If you die, your share does not automatically go to your co-owner – if you name someone else in your will, for instance, it will go to them. If you die without a will, rules of intestacy apply.
With tenants in common, there is a trust of sale arrangement which means that if one tenant decides to sell, the whole property must be sold.
However, if you wrote a trust deed when you first got the mortgage, you may be able to sell your share to your co-owner before putting the property on the market depending on what you agreed at the time.
Does a joint mortgage affect my credit score?
When you make a joint application for credit – which could be a mortgage, credit card or a loan – the name of the person you make the application with appears on your credit report. This is known as “financial association”.
“All borrowers need to meet the lender’s criteria to be accepted for a mortgage – to qualify for the best rates you will both need to have a good credit score,” says financial broker, Holly Andrews. “Pairing up to buy a property with someone who has bad credit will make borrowing more expensive for you too.”
It’s therefore very important all co-applicants are honest about their financial history, including any County Court Judgments (CCJ), late payments for utility bills or council tax, and any other arrears. Everyone who is applying for the mortgage should be on the electoral register, as this is the first criteria of credit worthiness that a lender will check.
Read our in-depth guide on managing joint finances
Can I get a joint mortgage with my parents?
Yes, but they need to be homeowners themselves. Getting a joint mortgage with your parents could improve your chances of getting on the housing ladder thanks to their income, savings or equity in their own home.
You could go down the tenants in common route outlined above, or choose one of the following options:
- Joint borrower, sole proprietor mortgage
- Guarantor mortgage
Not all lenders offer these, and some come under different names like family springboard, lend a hand or family deposit mortgages.
See our guarantor mortgages guide for full information on these types of mortgages
Although with joint borrower, sole proprietor mortgages you can avoid paying the 3% stamp duty surcharge (the rate for second homes, applicable even if you are a first-time buyer), you’ll be liable to pay it with most other types of joint mortgage with your parents.
If you cannot keep up with the mortgage repayments, the lender could go after your parents to stump up the money instead. If they cannot meet the payments, they run the risk of potentially losing their home. With this in mind, it is crucial your parents understand the implications of what they are doing – it might even be worth drawing up a legal agreement between you all.
Edited by: Sarah Guershon
Image credit: Klaus Vedfelt/Getty Images