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Guide to Joint Mortgages

The old adage, ‘two heads are better than one,’ applies to getting a mortgage. By joining with a partner, relative or friend to get a mortgage, you can effectively, double (or triple if there’s three of you) the amount of money you can borrow to buy a house.

This post will guide you through the joint mortgage application process.  

What is a Joint Mortgage?

A joint mortgage is where two or more people are liable to pay off a mortgage and buy a property. This means that both parties are equally responsible for making the repayments every month. However, there are two ways of legally making this arrangement. These are by;

• A Joint Tenants agreement – Each owner has an equal stake in the property and must apply for a mortgage together, i.e. separate mortgages for each share are not permitted. This means that if one joint owner dies, ownership of the property is passed to the other named party. Inheritance tax may still be payable if the co-owners are not married or in a civil partnership.
• Tenants in Common agreement – One party claims a larger stake in the property when it is sold. They may also pay the most towards the mortgage every month.  Tenants in common can name another beneficiary in their will, should they pass away during the length of the mortgage term.

Who is Eligible for Joint Mortgage Applications?

• Couples in long-term relationships looking to become jointly responsible and jointly liable for paying off a mortgage.
• You can also apply for a joint mortgage with friends, family or with business associates (up to four individuals).
• You must prove, with all necessary documentation, that you can afford the repayments for a mortgage.
• You must have rights to live and work in the UK.

How Much Can We Afford?

The lender will combine your monthly outgoings and earnings to work out the amount of mortgage you can be offered.

How much do Joint Mortgages Cost?

As with all mortgages, there will also be associated charges in order to set this up. As well as the normal set up costs including arrangement fees such as valuation costs etc.… you will also need to consider paying for;

• Income Protection Insurance
• Life Insurance
• Joint Mortgage Protection Insurance

For more details on the fees associated with setting up a mortgage, take a look at this Guide to Applying for a Mortgage.

How do I Get Out of a Joint Mortgage?

If circumstances change and you no longer want to share a home together, it is possible to exit your joint mortgage. This may involve selling the house to pay off the mortgage and starting again. Or you may decide to draw up a Declaration of Trust Agreement (this is typically used in Tenants in Common cases). With the help of a solicitor, you and your joint mortgage holders decide what the terms for splitting and exiting the mortgage will be. Typically, this will involve exact figures of payment, a notice period and other things. This agreement will protect everyone’s interests within the joint property.

If you have signed on as joint tenants, you may also apply for a Notice of Severance at a later date. This is where you give notice to the other parties that you would like to change to a Tenants in Common agreement.

Let’s Look at a Joint Mortgage Example

 Paul and Tina decided to buy a £100,000 house together. Paul had £50,000 to put towards the deposit, whereas Tina only had £5,000. Together they applied for a joint mortgage for £45,000, which they decided to split 50/50.

However, after seven years, Paul and Tina decided to split up. As they signed the mortgage agreements as joint tenants, Tina and Paul get equal shares of the sale of the property, even though Paul contributed a lot more as a deposit.

Had they have opted for a Tenants in Common agreement; they could have agreed upon proportional shares from the sale proceeds. Further, at any point in the Joint Tenants agreement before the split, either Tina or Paul could have issued a Notice of Severance to the other party. This is where Joint Tenants can legally apply to change the agreement to a Tenants in Common contract.

What are the Advantages of Joint Mortgages?

• Larger Deposit-  You have a higher deposit, which could get you a higher value home. You will also likely have lower interest rates to pay, as hopefully, your combined deposits will mean you can pay for a lower loan to value mortgage.
• In it Together -You have the security of another person or persons who can pay the mortgage every month, should you fall into difficult circumstances and be unable to make up your full payments.

What are the Disadvantages of Joint Mortgages?

• Financial Links to Others - Should anyone in your joint mortgage application have a less-than-perfect credit rating, your credit history could also be negatively affected. Therefore, it is key to be aware of everyone’s circumstances going into this agreement. Even doing things like making too many applications for mortgages or loans can affect your credit report. Check out or guide to improving your credit rating for more on this.
• Jointly Liable - If one of the parties in a joint mortgage agreement defaults on their payments, the other(s) are directly liable for covering the payments. This makes trust agreements so vital. 
• You May be Forced to Sell - Should one person want to move out, you may have to sell your home, which can be a long and very stressful process. This announcement may come at a time when you can’t afford the extra fees. Therefore, it is important to have agreements, so that everyone is clear, should the worst happen and you need to get out of the joint mortgage pronto. For this reason, you may also need insurance, as well as some savings put back.
• You May Need A Joint Mortgage Separation - Further, all mortgage holders must agree and give their consent, if someone wishes to leave the agreement. If you have drawn up a legal declaration of trust this should be relatively easy. However, life can sometimes get in the way and the other person or persons may not give you their consent to move out at the time you wish. If there is a breakdown in the relationship, you may need to move, so you may have to factor-in extra costs like paying rent alongside your mortgage, whilst the process of exiting your joint mortgage takes place.
• You Need Consent From All Parties - If you wish to remortgage at any point you will also need the consent of all parties to switch, there could be extra costs in terms of fees. To find out more, look at our Guide to Remortgaging.

What are the Alternatives to Joint Mortgages?

You could also try a guarantor mortgage with a family member. Here is more in the Guide to Guarantor Mortgages.

You could also look to shared ownership schemes in your area for new build properties. See more in the Shared Ownership Guide.

Before you consider taking out any mortgage offer with other people, seeking financial advice from an independent mortgage advisor can make the process easier, ensuring that you get the best deal and rates for all involved. Speak to an independent mortgage advisor for free advice.