What is a Joint Mortgage?
Joint mortgages are often taken out with a partner, but can also be taken out with friends and family. A parent may take out a joint mortgage with their child to support them with mortgage payments and boost their application’s chance of success.
You might decide to take out a joint mortgage with your partner, friends or family. But having a joint mortgage doesn’t mean you have to be living with the other party or parties sharing the mortgage.
One of the benefits of a joint mortgage is that you’ll combine your financial might with the other applicants, which could help you access a larger mortgage amount. Pooling your financial resources could help you build up a larger deposit pot, and potentially reduce the amount of interest you’ll have to pay in the long run.
Can I get a joint mortgage?
Anyone that can get a traditional mortgage can get a joint mortgage. As with any other type of mortgage, your affordability is based on your financial circumstances, including your credit score which demonstrates your creditworthiness – how much of a risk you present to lenders – as well as your monthly household incomings and outgoings.
When applying for a joint mortgage, each applicant will have their credit score assessed, so if one of the people on your application has a poor credit score your chances of securing a joint mortgage could be reduced.
Different types of joint mortgage
Whichever type of joint mortgage you’d like to take out, Because of this, you need to be sure that you trust the other members of your joint mortgage.
if they fail to contribute to the monthly repayments, you will still be required to make the full repayment. If no payment is made, both of you will see a negative on your credit profile.
When it comes to how you split the repayments – and crucially, how you split the ownership of the property – you have two choices.
1. Joint tenants
As a joint tenant you will have equal property rights to the other tenant(s). All tenants will get an equal share of the proceeds of the property sale if you put it on the market. The full property rights are passed on to the remaining joint tenant in the case of death.
Joint tenancy is usually preferred by couples because they own the property equally.
2. Tenants in common
Where tenants in common differ from joint tenants is that the share of property each member has can be divided in a number of ways.
This option allows for complex purchasing arrangements. It can be used for couples who may wish to protect the amount they brought into the purchase (deposit) or would like to leave their share on death to another person(s).
Depending on the financial circumstances of those looking to move in together, the share of each owner can differ. As an example, three friends may choose to live together, where two of the friends take out a 25% share of the property each and the third a 50% share. This means that friends with large differences in their individual financial circumstances can live together.
You can also sell your share in the property when you like, allowing the other shareholders to retain their ownership of the property, while you move on to a new property, either by taking out a new mortgage or renting.
In terms of inheritance you can leave your share of the property to whoever you wish, it doesn’t need to be the other tenants.
You will be bound by a deed of trust, which is a legal document drawn up by a solicitor for tenants in common, including those who have purchased the property through a joint mortgage.
Tenant in common status refers to the shared ownership of the property, rather than the amount each tenant contributes to the mortgage.
Credit score implications of joint mortgages
Having a financial arrangement with someone in the form of a joint mortgage can have a far reaching impact on your credit score.
If the other member of your joint mortgage has bad credit it can harm your application for a joint mortgage. Or, if they develop bad credit during the mortgage, the lender may think you pose more of a risk than you do in reality.
Moreover, missed or late payments during your mortgage term will show up on your credit score. Even if you weren’t responsible for the missed payment, it still will be counted against you by lenders in future credit applications.
As your credit score is one of the key quantifying factors looked at by lenders, you can boost your chances of being successful for a joint mortgage application by ensuring you and your mortgage’s other applicants have a clean credit history before making your application for a mortgage.
Getting a joint mortgage with family
If you are reading this and thinking I could use my parent’s financial support to get on the housing ladder, here’s what you need to know about getting a joint mortgage with a family member.
Your parents can increase your creditworthiness in the opinion of a lender, which helps you in your chances of being accepted for your first mortgage.
If you decide to take out a joint mortgage with a member of your family, you’ll jointly own the property with your parent(s) and have the shared responsibility to make payments. With this in mind, you should only go down this route if all parties can comfortably afford the payments.
If, as a parent, you already have the financial burden of your own mortgage to pay, however much you want to help your child, it may not be the best financial decision for you unless you’re sure you can make the contributions you’re committing to.
A joint mortgage is never a decision to take lightly, especially when the other owner will be a family member.
How to split a joint mortgage
If you have bought with friends and now want to stake out on your own, or if you’re leaving a partner, you’ll need to know how to split a joint mortgage unless you want to remain financially entangled with those you are no longer living with.
Whether separating a joint mortgage is possible depends on the financial circumstances of all involved.
If a relationship is ending, with one partner moving out of the shared home, remember you are both still jointly and equally responsible for the monthly repayment until the mortgage and property is transferred into one name, if that is a financially viable outcome for one party.
Also worth remembering that it’s not just taking on the repayments, as the exiting party is going to require their entitled share of the properties equity before they release the property into your sole name.
The partner who has their name removed from the mortgage will have their borrowing potential boosted, compared to if their name was still linked to the mortgage.
By severing financial ties, it is likely that your credit files will no longer be linked, because you no longer have a joint debt. When your credit files are linked, how you and your partner manage debts and apply for credit can affect the other’s credit file.
When transferring the mortgage to your name alone, you will have to prove your affordability to meet mortgage payments by yourself. The lender is obliged by law to check whether you truly can afford the mortgage without the joint mortgage holder.
If you cannot afford the mortgage on your own, you might look into a guarantor mortgage. Here a relative or close friend will guarantee to make mortgage payments where you cannot, or use their savings as collateral. It is not a decision to take lightly as the guarantor in this case will be to pay the entire mortgage if you can’t.
If a lender has assessed your finances and deemed the repayments to be too much of a financial burden on your own, then it’s worth considering selling the property and finding something more suited to your finances.
Compare joint mortgages
At KnowYourMoney.co.uk it’s easy to compare joint mortgages. Using our comparison table you can compare the differences between each mortgage product, to determine which will be better value for your financial circumstances.
To work out the total cost of each mortgage you’ll need to know how much you’d like to borrow, what the interest is, and if you can afford to make overpayments to reduce the amount of interest you’ll be liable to pay.
John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more