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.
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;
The lender will combine your monthly outgoings and earnings to work out the amount of mortgage you can be offered.
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;
For more details on the fees associated with setting up a mortgage, take a look at this Guide to Applying for a 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.
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.
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.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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