Joint mortgages have always been a popular option for those looking to become first-time buyers as it allows you to borrow more than you can on your own, and with the rising cost of living and house prices, they’re more in demand than ever. They work the same as a single person mortgage, the only difference being it’s taken out in two people’s names. If you’ve been toying with the idea or just want to know a little more about the process, here are all the things you should consider before you make that joint commitment.
1. Who you’re doing it with
You might have thought that joint mortgages are only available for people romantically involved (married couples, civil partnerships, or just couples in a long-term relationship) but in fact, anyone can submit a joint mortgage application. Friends, family members, business partners. Usually you can only have two people on a joint mortgage, but there are some cases that it can go up to three or four people.
2. Whether they qualify
While you can apply for your joint mortgage with just about anyone, whether your application is approved is another matter. There are some factors that might stop your application being approved. Firstly, a bad credit score often makes applicants look unattractive as it means they’ve had financial problems in the past. Secondly, age is, unfortunately, a considering factor and many lenders impose an age cap at 65-70, although a handful of lenders are more lenient if eligibility criteria are met.
3. Test run it
Getting a mortgage is a big commitment, but getting one with someone else is an even bigger one. If you’re planning on living with the person you’re getting your joint mortgage with, you want to make sure this is a situation that will last longer (or as long) as your mortgage payments will last. If you haven’t already, try renting together for a least a year as a trial run and to guarantee that you’re both committed to the financial responsibility (and can stand each other that long!).
4. Financially linked
Whoever you get your joint mortgage with, you will be financially linked with them, and it might impact your ability to borrow money in the future. You also jointly become responsible for both monthly mortgage payments being made. If your partner cannot make a payment, you will be expected to cover it that month and as a joint mortgage links you both on a credit report, any late payments might negatively impact both your credit scores.
5. Joint mortgage or guarantor mortgage
If you’re planning on getting a joint mortgage with your parents or family member who is giving you a little boost up the property ladder, then joint mortgages aren’t actually your only option. A guarantor mortgage is where a second party helps you get a mortgage by agreeing to keep up with your monthly repayments if you can’t. If you can technically afford a mortgage on your own but don’t tick all the boxes (are self employed with an inconstant salary, or have a bad credit score) then having someone guarantee that the payments will be made each month, even if you can’t, will alleviate lenders worries and get you your mortgage. The main difference here is the guarantor won’t actually own any of the property.
6. How much you can borrow
When getting a mortgage on your own, you can usually borrow up to around 4.5x your yearly income. But with a joint mortgage, you’re able to combine your salaries. So, if you earn £23,000 a year, on your own you could borrow approximately £103,500, but if you got a joint mortgage with someone on £30,000 a year, you could borrow around £238,500. However, if there’s more than two of you in the joint mortgage, lenders will typically only consider the two highest earning salaries, rather than pooling all salaries together. Consider your current financial situation, as all things are taken into consideration when taking out a mortgage, like monthly bills and spending – even things like retail shopping – so try to cut down before you apply.
7. Speaking with a mortgage broker
As much general advice you can seek out, there’s nothing as helpful as getting advice from an expert you can tell your specific situation to. Our mortgage brokers help you plan your budget accordingly and work out exactly how to make the most of your mortgage. We have access to more lenders and better rates, to ensure you get the very best deal possible.
8. Joint tenant vs Tenants in common
You need to work out which way to jointly own a property is right for your situation. If you buy your property as tenants in common, then each owner has their distinct share of the property and complete control over it. This means if one party wants to sell or leave their share to someone in their will, they can. A joint tenancy means everyone owns 100% of the property and have equal rights on everything to do with the property. So if you sell the property, the equity will be divided equally between you.
9. Make a will
It might seem a bit morbid but it’s important to consider where such a big asset you’re committing to will go if you’re not there. You spent a lot on it, you want to make sure it’s going where you want it to, or the choice might be taken out of your hands.
10. What will happen if one person wants out
There might be any number of reasons why a shared living arrangement comes to an end, but you’ll want to know your options of what happens when or if it does. You can sell the property out right and split the profits between you depending on your share. You can buy your partner out and continue living there, or vice-versa. You can continue to jointly own it but only one person lives there, such as if you’re divorced with children and one party wishes to stay there and raise them.
A joint mortgage is a big commitment but also a very exciting stage in your life. If you have any further questions about the process, don’t hesitate to reach out.