Whether you’re buying a home with a partner, friend or family member, joining forces with someone else can be a great way to get on the property ladder sooner. But whoever you’re buying a home with, there are a few conversations you need to have first. Here’s everything you need to know about joint mortgages.

 

Joint mortgages explained 🤝

When buying a home with a partner, relatives or friends, you’ll need to take out a joint mortgage if you want to share ownership of the property. A joint mortgage can be taken out by two to four people. Each person will be named on the property deeds and is jointly responsible for making the mortgage repayments.

 

The two types of joint ownership 2️⃣

  • Joint tenants – You share ownership of the property equally and you’re viewed as a single owner. Something called ‘right of survivorship’ means that if one of you dies, ownership of the property automatically passes to the other owner(s). This type of ownership is most common between married couples, but can be used by anyone.
  • Tenants in common – Each person owns a separate ‘share’ of the property, which doesn’t have to be equal (for example, one person can own 75% and the other can own 25%). This type of ownership is most common between friends, relatives or unmarried couples, or if the amount each person is contributing to the deposit or mortgage is significantly different.

 

The benefits of joint mortgages 👍

One of the main advantages of buying a property with someone else is that if lenders take your combined income into account, you’ll usually be able to borrow more for your mortgage. You might also be able to afford a more expensive property.

You could also combine your savings to put down a larger overall deposit and access a wider range of mortgage deals, including those with lower interest rates. Finally, you have someone else to split the cost of the monthly mortgage repayments, utility bills and maintenance costs with.

Buying a property with friends is becoming increasingly popular and is a great option if you want to get on the ladder sooner! But, whoever you’re buying a home with, make sure it’s someone you trust.

 

The disadvantages of joint mortgages 👎

With a joint mortgage, you’re ‘jointly and severally liable’ for the mortgage repayments, which means that if one person can’t pay their share, the other(s) will still be expected to pay the full amount. Also, when you apply for a joint mortgage with someone else, you create a financial link with them.

This means that if one person can’t keep up with the mortgage repayments, everyone’s credit rating could fall. In the worst case scenario, your home could be repossessed by your lender.

 

How to get out of a joint mortgage 🏠

If you and anyone else on the mortgage decide to go your separate ways – whether it’s because of a divorce, relationship breakdown, or just wanting to move out – one person will usually buy the other out.

For example, if there are two people on the mortgage, one person will take ownership of the other’s share of the mortgage, known as a ‘transfer of equity’. You may need to borrow more to do this. If there are more than two people on the mortgage as tenants in common, everyone staying in the property will need to buy out the person who leaves.

 

What are the other options for ending a joint mortgage? ✂️

You don’t always have to organise a transfer of equity to end a joint mortgage. You could also sell your home and use the proceeds of the sale to pay off the mortgage.

However, this can take time and if you’re still in your initial deal period (for example, one year into a two-year fixed mortgage), you might have to pay an early repayment charge. As these charges can be thousands of pounds, it’s a decision worth weighing up.

 

The importance of legal advice 💼

No matter which route you choose when buying a home with someone else, it’s important to seek independent legal advice. Drawing up a legal agreement, such as a cohabitation agreement or a declaration of trust, could help protect everyone named on the mortgage.

These documents set out the share of the property each person owns, how costs should be shared and managed, plus how any equity should be divided when the property is sold. While it’s an awkward upfront conversation to have, you might be glad you had it at some point in the future!

 

Other things to consider 🤔

When buying a home with someone else, there are a few other things you might want to consider. For example, what do you want your mortgage to look like for the next few years?

Having an open discussion about how much you would feel comfortable paying towards the mortgage moving forward, plus how long you’d like to live together, will help you choose the best mortgage for your personal situation.

While it might be awkward, having these upfront conversations could save you a lot more awkwardness down the line!

 

So if you’re ready to buy a home with someone else, why not take the first step and see how much you could borrow? Try our mortgage calculator!

 

Your home may be repossessed if you do not keep up repayments on your mortgage.

Moneybox Mortgages is provided by Moneybox Mortgages Ltd.