Joint

How much can you borrow?

A big advantage of having a joint mortgage rather than being a single borrower is that you can usually afford to buy a more expensive property. This is because you can combine your incomes when it comes to the affordability checks. Most lenders calculate the amount you can borrow using a multiplier of 4 or 4.5 for your annual salary. This makes a considerable difference to the amount a lender will offer you for a mortgage loan compared with applying for one as a single applicant. Some lenders consider higher multipliers of 5 or even 6, depending on your circumstances and their criteria.

Some lenders also take additional income into account, such as overtime or bonuses, as well as benefits you may receive from the government. Joint mortgages can be taken out when only one of you has an income but this will significantly reduce the amount a lender will be prepared to offer you for a loan. It’s important to note that each borrower is jointly responsible for the mortgage. This means that if one of you is unable to make the mortgage repayments, the other is liable for them and must find a way to make up the shortfall.

When applying for a joint mortgage, you can also pool your savings to pay a bigger deposit, which will lower the amount you need to borrow. This is known as the loan-to-value (LTV) ratio. The lower the LTV ratio is, the more mortgage options will become available to you. You’ll benefit from a wider range of deals with better rates. You don’t need to pay equal amounts for the deposit and we’ll explain that in a bit more detail below.

Types of joint ownership

There are two options for owning a property with a joint mortgage: as joint tenants or tenants in common. The option that’s best for you depends on whether you wish to have equal shares of the property and how you wish your shares to be dealt with in the future.

Joint tenants

With a joint tenancy, you own equal shares of the property, regardless of whether one of you paid more than the other. If you decide to sell the property in the future, the profit from the sale will be divided equally between you. Should you decide to remortgage, you will need to obtain a new mortgage together. In the event that one of you dies, that person’s share of the property will automatically be inherited by the surviving joint tenant. This is regardless of whether a different recipient has been named in their will and is called the right of survivorship. Due to the nature of this arrangement, joint tenancies are usually favoured by those in long-term relationships.

Tenants in common

As tenants in common, you can stipulate the share that each person owns of the property. One of you may have paid a bigger deposit, for example, or may be paying more each month for the mortgage repayments and feel this is a fairer arrangement. You may have bought the property with two other people, with two of you seeking a 30% share each and the third requesting a 40% share. Whatever you decide between you, your solicitor will draw up a deed of trust to confirm the percentage owned by each person.

If your circumstances change in the future and you wish to sell your share of the property, you can do so. You can also choose who you wish your share to be passed to in the event of your death by naming a beneficiary in your will. This type of arrangement is usually preferred by family members, friends or business partners who purchase a property with a joint mortgage.

Eligibility criteria

Just as if you applied for a mortgage on your own, each applicant has to meet the lender’s criteria for a joint mortgage. Your affordability will be checked, taking your deposit, income and expenditure into account as well as your credit rating. You can be approved for a joint mortgage if one of you is unemployed as long as the other applicant has sufficient earnings to pass the affordability checks. If the unemployed applicant receives benefits, these may be included in the calculations, which will increase the amount that can be borrowed.

Some lenders set a maximum age that borrowers can reach at the end of the mortgage term, such as 75. This is because the risk increases for the lender with a decreased income in retirement as well as possible health issues. Our mortgage brokers have unrestricted access to the market so can search for deals that are more suitable for older borrowers.

At Trinity Finance, we’re ready to help you start your journey towards joint ownership. Our mortgage brokers, located throughout Kent, London and Edinburgh, can check your eligibility for a joint mortgage and ascertain your borrowing potential. We work closely with specialist lenders who may be able to provide more flexible lending options if you have an irregular income – for example, if you’re self-employed or a contractor – or if you have an adverse credit rating. Just give us a call on 01322 907 000 for impartial advice and to discover the mortgage deals available to you. If you prefer, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form and one of our mortgage experts will reply to you as quickly as possible.

How does a joint mortgage affect your credit score?

When you apply for a joint mortgage, a credit check is carried out on each applicant and a financial association is made between you. Whilst you might have an excellent credit rating, the person you are buying with may have a poor one. If this is the case, their rating may negatively influence a lender’s decision regarding your mortgage application. Depending on the severity of the bad credit issue and how recently it occurred, you may be offered fewer deals with higher rates or your application may be declined altogether. As mentioned above, our mortgage brokers can approach lenders who specialise in dealing with bad credit applications to help you secure a joint mortgage loan.

Once you have a joint mortgage, the new loan will be detailed on your credit report and we’ve already mentioned that you’ll have a financial association with each other. If the other person has a better credit history than you, this can go in your favour when credit checks are carried out on you in the future. However, if they have a poor credit rating, the association with them will show on your credit report and lenders may be wary of giving you credit in the future or may charge you more expensive rates. Should the other borrower fail to pay their normal bills or miss any mortgage payments, this will be detrimental to your credit report. This is why it’s imperative to trust the person you’re buying the property with.

Can you leave a joint mortgage?

Circumstances change so it’s understandable that there may come a time when you wish to end your joint mortgage. You may split up with your partner, for example, or you may fall out with your relative. You may have to relocate for your job, needing to move out and buy elsewhere. You may have bought with a friend who then meets someone and wishes to live with them instead. Whatever your reasons for wishing to leave this arrangement, there are different ways to go about ending a joint mortgage.

Sell the property

One option is to sell the property and repay the mortgage loan from the sale proceeds. The remaining profits can then be divided between you. Just be aware that you may be charged an early repayment fee if this happens before the terms of your mortgage allow.

Pay off the mortgage

It may make more sense for each borrower to keep making their mortgage repayments until the loan has been repaid in full. For example, you may have bought the property as a couple but have since split up and one of you wishes to continue living there with your children.

Transfer of equity

If one of you wishes to leave the mortgage arrangement, you can transfer your joint ownership to a single person. Whoever wishes to take responsibility for the mortgage can buy out the other person so that they own their share of the property. For example, if you split up with your partner and they want to leave but you wish to keep the property, the ownership can be transferred into your name providing that you can prove your affordability for this increased financial commitment to the lender. If you can’t afford to take on their share or don’t want the additional responsibility, another person can apply for a transfer of equity. They will have to meet the lender’s criteria and pass the affordability checks before the transfer of equity can take place between them and the person wishing to leave the joint mortgage.

Whichever decision you make, each borrower needs to continue with their mortgage repayments until the exit plan has been completed.

The pros and cons of a joint mortgage

Taking out a joint mortgage with someone you trust can have various advantages, which we’ve summarised below. As with any large financial commitment, there are also disadvantages to consider and these are also summarised.

Advantages

• A joint mortgage is a good way to get on the property ladder when applying as a sole applicant isn’t sufficient.
• You can pool your savings and pay a bigger deposit than you could if applying on your own. This will enable you to benefit from a wider range of deals and better rates, potentially saving you a significant sum across your mortgage term.
• Your combined income can increase your borrowing potential and allow you to buy a more expensive property.
• Other costs can also be shared when you opt for a joint mortgage. This can include your solicitor’s costs, the surveyor’s fee, the stamp duty charge and insurance costs. When you’ve moved into the property, you can also split the household bills between you and other costs, such as those needed for any property repairs.

Disadvantages

• If one person defaults on the mortgage, the other borrower is liable for the shortfall.
• Your financial association puts your credit rating at risk if the other person has a bad credit score.
• If one applicant is an existing homeowner or has previously owned a property, you won’t benefit from any incentives that lenders would otherwise offer to first-time buyers.

Joint mortgage protection

Having mortgage protection in place provides security that your mortgage repayments will be covered if need be. There are two types of policy to consider: joint mortgage payment protection insurance and joint mortgage life insurance.

Joint mortgage payment protection insurance

Joint mortgage payment protection insurance (MPPI) provides essential cover should you lose your job, suffer from an illness or have an accident. If you fail to keep up with your mortgage repayments, you risk your property being repossessed. There are two types of MPPI cover to choose from. One of these is specifically designed to cover your mortgage payments. The other one is a general income protection insurance, which means you can use the payments for whatever you need.

Joint mortgage life insurance

If you have joint mortgage life insurance in place, the mortgage will be repaid in full in the event of your death. This prevents the financial burden from being passed on to anyone else. If you have a joint mortgage with your partner, for example, it ensures they’re not left trying to find the funds to repay the balance of the loan should you pass away. This gives you both peace of mind for their future financial security.

Become the co-owner of a property with a joint mortgage

When you’re ready to begin your search for a joint mortgage, get in touch with us on 01322 907 000. Our mortgage brokers are available to discuss your circumstances and mortgage goals before providing you with impartial advice and guidance on joint mortgages and the alternatives available.

You may, for example, discover that a joint borrower sole proprietor mortgage (JBSP) is more suitable for your needs. This is when someone else agrees to joint liability for the mortgage repayments but you are the only one named on the property deeds. A JBSP is a good option if your parent is happy to help you out financially but doesn’t wish to be penalised with the second property stamp duty surcharge. Another alternative to consider is a guarantor mortgage. If you wish to get a foot on the property ladder, a guarantor provides security that the mortgage repayments will be covered if you’re unable to make them. Like a JBSP, you are the only one named on the deeds, allowing you to enjoy full ownership of the property.

At Trinity Finance, we benefit from having an unrestricted range of first and second charge lenders. This means we can search for the best joint mortgage product to suit your needs, including exclusive deals that lenders only offer through brokers. When you’re ready to proceed with your joint mortgage application, your dedicated mortgage broker will look after the mortgage process from start to finish to ensure it runs smoothly.

Our mortgage experts – located throughout Kent, London and Edinburgh – can also assist you with other home-buying concerns, such as buildings and contents insurance and mortgage protection. To get in touch with us after office hours, send an email with your joint mortgage queries to info@trinityfinance.co.uk or via our contact form and one of our mortgage specialists will reply to you as quickly as possible with more information