Obtaining a joint mortgage
Many mortgages are arranged on a joint mortgage basis meaning that there is more than one borrower.
Under a single mortgage arrangement, one person borrows the money and is responsible to pay back. Under a joint mortgage arrangement, all borrowers are borrowing the money and liable to pay back.
Responsibility for the lending is undertaken on a joint and several liability basis. This means that the lender, when chasing their funds, can decide to pursue one borrower for all of the funds due.
[7min]
Issues with joint mortgages
Taking a mortgage is clearly a major financial commitment, even more so when undertaking on a joint basis.
If a borrower later decides they want to be released on the contract, they can not do so without the permission lender, nor the other joint borrowers.
For this reason, it is very important that borrowers think very carefully when taking out a mortgage on a joint basis.
Taking a joint mortgage
Joint mortgages are usually taken out a joint tenancy basis. This is the classic route for married couples or people in civil partnerships. If one of the joint tenants dies, the value of the property passes to the other.
Owners under a joint tenancy cannot pass their share of the property to an ultimate beneficiary under their Will. Joint tenants are considered as one under the law and so a joint mortgage has to be taken out.
Properties can also be held under tenants in common basis. Up to 4 people can be tenants in common. This is sometimes a choice for relatives or friends buying together. The tenants in common do not need to have equal shares of the property and they can leave their own shares to a beneficiary.
Lenders will allow tenants in common to take out a joint mortgage but are not comfortable with each owner seeking to mortgage their individual share of the property.
If you need a joint mortgage call us now on 020 8979 9684
Multiple mortgage applicants
Joint mortgages are not restricted to 2 applicants. Many lenders will allow three or even four applicants on a mortgage application.
Please note, lenders do not consider income from all applicants on a multiple mortgage application. Normally they will look at just the income from two of the applicants.
Joint mortgages and insurance
Due to the potential complications, all parties in the event of one owner dying, or becoming seriously ill, it is vital that joint mortgage applicants seriously consider their mortgage options.
If you were to die, what would you want to happen to the property? Where would it leave your joint owner? What would they want to happen?
Speak to your mortgage broker about insurance options that are open to you as a joint mortgage borrower, and don’t forget to make a valid Will.
Joint mortgages and future plans
Joint mortgage borrowers who are likely to go their separate ways in the future should agree an outline of their plans in advance.
Perhaps you can agree that none of you will look to sell within five years, after that point any one of you can trigger a sale to which the other owners should agree.
Failure to plan in this way can lead to disagreements and stress at a later date.