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Joint mortgage

Journalist: Frances Ivens, Telegraph

ended 28. March 2023

This is Money/ MailOnline reporter looking at whether joint mortgages could provide a way for first-time buyers to get on to the housing ladder. 

Questions for brokers:

  • Who can get a joint mortgage?
  • What should you consider before entering into one?
  • Is now a good time for a joint mortgage in current market conditions?
  • What are the differences from a single mortgage where two or more pay?
  • What are the risks?
  • What are the benefits?

 

13 responses from the Newspage community

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Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
Analysis by Britain's biggest group of mortgage lenders, Halifax, Lloyds Bank and Bank of Scotland, recently showed that almost two-thirds of mortgage completions are now in joint names with two or more people.
Joint mortgages are often the only way borrowers can secure a sufficient mortgage to get on the property ladder. Banks and building societies use mortgage affordability calculators to work out maximum loan sizes, but ultimately many will lend between four and 5.5 times single or joint incomes.
Lenders allow one or two people on the mortgage application as standard, but some are more generous and accept three or even four incomes.
Halifax will provide larger mortgage loans for some borrowers when they take a five-year fix. The move could mean the maximum lending amount increases by up to 9% or around £25,000 on an average application.
If you are going to take a combined income mortgage you need to understand you will be jointly liable for the debt.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Buying a property with someone is a great way of increasing what you can afford and taking steps to get on the housing ladder. There are risks associated with joint mortgages that need to be considered. When buying a property you can split the ownership to 'tenants in common', which means you each legally own half the house. This is different to normal joint tenants where you both own the entire home together. Tenants in common can be useful if you are putting in different amounts and want to weigh the ownership other than 50/50. Your mortgage, however, will be a joint liability. This is the biggest risk. If the person you buy with stops paying the mortgage, you are then still liable for the whole amount. Ensuring relevant insurance for unemployment and illness is a good way to mitigate this, but if an argument or just a change of mind occurs you might be stuck.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Joint borrower sole proprietor mortgages are an excellent way for first-time buyers to get their feet on the property ladder if they need a helping hand. They allow the use of a third party in the affordability calculation, usually a family member, without including them on the title deed. As a result, you retain the benefit of being a first-time buyer, which may result in stamp duty savings. These mortgages are designed for people who will be able to repay the loan on their own in the future. However, the joint borrower will not be added to the title deeds under this scheme, which means they will be on the debt but not registered as the owner of the asset. As a result, seeking independent legal advice is critical to ensuring that all implications are fully considered.
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Editor
Justin Moy
Managing Director at EHF Mortgages
With over two-thirds of all First Time buyer transactions in joint names, the need to combine incomes to afford property is at its highest level - it doesn't have to be with a partner, potential joint owners could be siblings, co-workers, and even parents who could also contribute spare income through a suitable mortgage scheme. The main benefit of combining many different incomes is that property becomes affordable in some of the most expensive areas of the UK, and ownership is achieved over the equivalent rental option, but the risks will always be if co-habitors decide to go in different directions - the cost of selling and potential early repayment charges might make that an expensive decision.
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Edward Checkley
Managing Director at Advias
Joint mortgages are a great option for close family, friends, or partners to buy a home together. Before committing, it's vital to discuss financial responsibilities, ownership division, and contingency plans. Having a legal agreement is highly recommended.

The current market offers numerous sole proprietor solutions, making it a favorable time for joint mortgages. Keep in mind, all parties are responsible for the mortgage debt, and if one can't meet obligations, the others must cover the full amount.

Being part of a joint mortgage may affect your borrowing capacity for future home purchases, and additional stamp duty costs might apply. Consider the pros and cons carefully before making a decision.
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Adam Smith
Founder at Alfa Mortgages
The main benefit of a joint mortgage is as a means to increase affordability and borrowing by utilising two incomes. Most of my first-time buyer clients get a joint mortgage with either their partner or siblings in order to get onto the property ladder when this would not be feasible on only one income. However. joint mortgages are not without their risks. Before entering a joint mortgage, it’s important to consider that both owners of the property are responsible for making repayments, therefore it’s vital you can trust each other to do this each month. This is an alternative to a single mortgage where only one client is responsible for making repayments despite two clients potentially having ownership of a property. There is no ‘right time’ for a joint mortgage. It simply boils down to borrower circumstances and affordability.
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Samuel Ewen
Managing Director at Rosehill Financial Services
It's tough to buy on your own. Taking out a joint mortgage can make it easier to get onto the property ladder, as this generally results in higher lending. It's possible to get a joint mortgage with a partner, family or friends.

That said, it's important that you fully trust the other person, as you'll both be liable for the full mortgage debt. What happens if you fall out? What happens if you buy with a friend who then wants to buy with a partner? It's also important to consider whether the person you buy with has owned a property in the past. If they have, you'd lose your stamp duty relief.

Ultimately there's no best time to take out a joint mortgage. The main thing is to be confident with who you're buying with. Don't rush into a decision on what is likely to be your largest debt.
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Luke Thompson
Director at PAB Wealth Management
With the increases in property prices in the last two to three years the thought of a joint-borrower sole proprietor could be enticing to borrowers who are wanting to stretch their affordability.

It is important for both parties to understand the potential implications though. Although the additional party may not be named on the deeds to the property they will be liable for the monthly mortgage payments should the borrower not pay their monthly mortgage payment.

This could result in an impaired credit report for any additional borrowers.

I think that they can be a good way for younger people to stretch their mortgage budget and help get themselves on the property ladder. However, they also come with the risk of overstretching your budget especially with current conditions and increases in mortgage rates. People who used these types of mortgages in the past 2 years could find themselves paying much higher interest rates now as their deals come to an end.
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Amit Patel
Adviser at Trinity Finance
It allows you to apply for a mortgage with someone else but benefit from having sole ownership of your home. Combining your incomes allows you to borrow more.

As both of you are named on the mortgage, you’re jointly liable for the mortgage repayments from the outset.

You can apply for a JBSP mortgage with an immediate family member or with a friend.

Pros - Increased affordability that another borrower provides. Combine your savings to pay a bigger deposit and benefit from better interest rates. Despite having help with the mortgage, you will have sole ownership of the property. If the other borrower is a homeowner, they won’t be charged a second property stamp duty surcharge.

Cons - Whilst being financially committed, the other borrower won’t have ownership of the property or benefit from any financial gain, such as a share of the profit if you sell. Being financially obligated to a JBSP mortgage, the other borrower may have difficulty getting another loan.
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Gary Bush
Financial Adviser at MortgageShop.com
We have recently found that friends, work colleagues, siblings, aunts and nieces, and even cousins are using the benefit of their combined incomes and indeed deposit balances to purchase properties on a joint mortgage. This can help overcome the singular income restrictions posed by the higher value of properties in the UK. For these cases, it's advised to purchase as tenants in common which places the property in equal shares to both purchasers in the event of the death of the other - protecting their respective estates.
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Rob Gill
Managing Director at Altura Mortgage Finance
Joint borrower sole proprietor (JBSP) mortgages are a type of mortgage where two or more borrowers take out a mortgage together, but only one of them is the sole owner of the property. This type of mortgage is becoming increasingly popular among first-time buyers as an alternative to guarantor mortgages, or family members or friends who wish to purchase a property together but cannot afford to do so individually.

Anyone can apply for a JBSP mortgage as long as they meet the eligibility criteria set by the lender. Typically, this includes a minimum age requirement, proof of income and affordability, and a good credit history. Lenders will also require all applicants to be listed on the mortgage application and be jointly liable for the loan repayments.
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
Owning a property jointly with another person opens up doors for many first-time buyers.

It’s always important to get good legal advice regarding the ownership structure you want to take, whether that’s joint tenants (where each tenant has equal rights to all the property) or tenants in common (where each tenant can hold a different share of the property).

There are lenders who'll consider up to four applicants for a shared mortgage, and not all of them need to be a first-time buyer, so getting advice on your situation is a good idea.

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Austyn Johnson
Founder at Mortgages For Actors
There are a lot of options for FTB, but a lot of them are limited by the age of the eldest borrower. Full research needed. Gen H have some good ideas about income boosters.