Joint mortgages - what you need to consider

Rising interest rates alongside the cost of living has made buying a property on one income a real challenge. This has led the majority of first-time buyers to look to purchase as a couple.

You don’t need us to tell you that buying a property together is a huge step in a relationship. Mortgages by their very nature are a long term commitment. Couples often spread the cost across a minimum of 25 years and often longer to make the payments affordable.

We don’t want to dampen your enthusiasm for buying your first home together but there are a few aspects of joint ownership to consider that could prevent uncomfortable conversations in the future.

First, we’ll cover the basics of how a joint mortgage works before we consider alternative ways to purchase a property together.

What is a joint mortgage?

Up to three and sometimes four people can apply for a joint mortgage. A property can therefore be purchased with a partner, friends, a member of the family, or a business partner. You don’t have to be all first time buyers or have owned property before. All parties will be liable for the mortgage debt. If one person cannot meet their share of the monthly repayments the other(s) will need to pick up the shortfall.

Once you’ve bought the property all mortgage holders become joint tenants. This means all parties have equal rights to the whole of the property. If it’s sold any profits are split equally.

In the event of a death, the property will automatically pass to the other owner(s) not to any family members or dependents, irrespective of any wishes detailed in a will.

How much can you borrow on a joint mortgage application?

Buying a property together allows you to combine your income to secure your preferred mortgage deal. Mortgage lenders will usually take the two highest salaries to determine how much they will lend.

This is just a quick marker though, many mortgage lenders consider other factors such as your credit history, employment record etc to determine how much they will allow you to borrow. It’s always worthwhile making an appointment with an independent mortgage broker so they can advise the best mortgage deal for your specific circumstances.

Tenants in common - an alternative option to a joint mortgage

You can purchase a property together as tenants in common rather than the joint tenancy agreement of a joint mortgage. This option means all parties have a specified share of the property. If one party wishes to move on then this share can be sold, or if a person dies their share can be passed to a beneficiary.

Ownership of property does not have to be an equal share. One of you may own 60% and the other 40% to reflect perhaps the initial deposit on the property.

This is a more common arrangement when buying a property with friends or family. A solicitor will draw up a deed of trust which is the legal document that shows the percentage of the property each person owns.

Joint mortgage or Tenants in common

Each of these mortgage types suits a different set of individuals and represents how you wish to determine ownership of the property. Each has its merits and should be discussed and understood before signing your mortgage agreement.

There are no differences in mortgage deals available whether you decide to become joint mortgage holders or tenants in common. This just applies to the legal side of how your mortgage is set up, there are no changes to mortgage deposits or monthly payments.

At Poole Townsend, we have over 50 years of experience in mortgage applications and can advise on all aspects to support first time buyers, those wishing to remortgage their properties on move up or down the property ladder.

Get in touch with our team to book an appointment.

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