The stereotypical picture of applicants for a joint mortgage is a married couple or civil partnership bringing together their finances and committing their future to one another. Increasingly, however, a new type of buyer is resorting to joint mortgages: first-time buyers (FTBs) struggling to get a foot on the ladder.
Teamwork
A joint mortgage is the most popular way for FTBs to fund their first home purchase, with more than six in ten opting for one1. While many of these will be couples, a growing number of FTBs are choosing to take out a joint mortgage with friends or siblings.
First and foremost, buying with someone else means you can split the costs. Saving enough money to pay the deposit is one of the biggest hurdles faced by many FTBs, with joint mortgages allowing buyers to share the burden. Beyond the initial lump sum, teaming up helps buyers by reducing their monthly payments and also means that joint earnings can be used to determine how much can be borrowed.
Joint or common?
At its heart, a joint mortgage works the same way as any other residential mortgage, the main difference being, of course, that there are more than one person taking on the financial commitment.
Typically, groups of up to four people can apply for a joint mortgage, though this varies from lender to lender. The big decision that all applicants for a join mortgage need to consider is whether to be joint tenants or tenants in common:
- Joint tenants essentially act like a single owner. You all have equal rights in the home, you split the profits equally when selling and, should one borrower die, the others will inherit their share.
- Tenants in common have separate interests in the whole property. This means that you can choose how to split the ownership, with one person, perhaps, paying a bigger deposit in return for a bigger share of the value when sold.
Do you trust each other?
Before applying for a joint mortgage, it is important to make sure you know the commitment you are taking on. For example, as joint tenants, if one person is unable to keep up with repayments, the others must cover the full amount.
Something else to bear in mind is that, if you decide you want to sell the property, you will need the agreement of all the owners to proceed. Should any of the other parties disagree, the issue could end up in court. Once more, trust and mutual understanding are crucial requisites for being successful joint mortgage holders.
Is it right for you?
So long as you comply with the normal borrowing standards such as affordability and credit history, it is usually possible for anyone to take out a joint mortgage, but that does not mean that doing so is right for every circumstance. Talk to us about your options.
Your home may be repossessed if you do not keep up repayments on your mortgage
1Halifax, 2023
