Joint Mortgages - What to Consider Before Applying With Someone Else

Taking out a mortgage with another person is one of the most significant financial commitments you can make, and it's also one that a surprising number of people approach without fully understanding what they're signing up to beyond the shared monthly payment. Whether you're buying with a partner, a friend or a family member, there are some important practical and legal considerations that are worth getting your head around before you apply, because they affect not just how the mortgage works but what happens to it if circumstances change down the line.

How Joint Mortgages Work

In a joint mortgage, all borrowers are equally responsible for the full amount of the debt, not just their share of it. This is what's known as joint and several liability, and it means that if one borrower stops paying, the other or others are responsible for the entire mortgage payment, not just half of it. Lenders will hold each borrower equally accountable regardless of any private arrangement between the applicants about who pays what.

This is an important distinction from simply sharing a bill, and it's one that people in joint mortgages with friends or partners don't always think through until they're in a situation where it matters.

How Lenders Assess Joint Applications

When assessing a joint mortgage application, lenders will look at the income and financial profile of all applicants. This is one of the main reasons people apply jointly in the first place, because combining incomes can allow you to borrow more than either applicant could individually. Most lenders will use a multiple of combined income to calculate the maximum loan available, though the specific approach varies.

Lenders will also look at the credit history of all applicants, and this is where joint applications can sometimes be more complicated than expected. If one applicant has a less-than-perfect credit history, that will affect the overall application and the lenders who are willing to consider it. The application is only as strong as its weakest element from a credit perspective, which is worth thinking about before you apply.

Joint Tenants vs Tenants in Common

This isn't about mortgages directly, but it's an important decision that goes hand in hand with buying jointly, because it determines what happens to your share of the property if one owner dies. Joint tenants means you each own the whole property together, and if one person dies their share passes automatically to the other owner regardless of what their will says. Tenants in common means you each own a defined share, which can be equal or unequal, and that share can be left to anyone through your will.

For couples this is often straightforward, but for friends or relatives buying together, tenants in common with a deed of trust setting out each person's share is frequently the more appropriate arrangement. It's worth taking legal advice on this alongside your mortgage advice.

What Happens if the Relationship Changes

This is the question that people are sometimes reluctant to think about at the start of a purchase but which is genuinely important to have a plan for. If you're buying with a partner and you separate, or with a friend and the arrangement doesn't work out, the mortgage doesn't simply divide. Both parties remain liable until the mortgage is either paid off, transferred into one name, or the property is sold and the mortgage redeemed.

Transferring a mortgage into one name, which is known as a transfer of equity, requires the remaining borrower to meet the lender's affordability criteria on their own, and the lender's consent is required. It isn't automatic, and it can be more complicated than people expect if one person's income doesn't support the full loan amount.

If you're thinking about buying with someone else and want to make sure you've got a full picture of what's involved, I'm happy to talk it through with you and help you understand how lenders will look at your joint application. Get in touch and we'll work through it together.

Barry, The Mortgage Network - Helping you make confident decisions and plan a mortgage that works for you.

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