Joint mortgages

How do joint mortgages work?

Joint mortgages work the same as a mortgage you'd take out on your own. The applicants put down a deposit and borrow the remaining amount from a lender to purchase a property. The amount you borrow is calculated as a percentage of the property value or price (whichever is lower) – this is known as the loan-to-value (LTV).

All of the applicants are then named on the mortgage and liable for the debt and repayments. The monthly repayment amount depends on the loan amount and interest rate.

You and the other borrowers can decide how to split the repayments. But if the repayments aren't made in full for any reason, the property could be at risk of repossession, and this would also negatively impact the credit ratings of all those on the mortgage.

With a joint mortgage, everyone who's going to be on the mortgage needs to apply. The lender looks at all applicants with regards to eligibility criteria. They look at the income, outgoings and credit history of all applicants to decide whether to accept your application.

Advantages of joint mortgages

There are a number of benefits to taking our a mortgage with 1 or more people:

• You can borrow more than if you were taking out a mortgage by yourself
• It may be easier to save a larger deposit as multiple people are contributing
• If you are unable to make the mortgage payment for any reason (sickness for example), your partner or someone else on the mortgage may be able to cover your share for a time

Ending a joint mortgage agreement

If you wish to end a joint mortgage agreement, you normally have the following options:

• Sell the property and pay off the mortgage
• The person who wants to move out could sell their share of the property and transfer ownership (and the mortgage) to the person or people wanting to stay

The first option is normally the simplest option (although you may face early repayment charges –ERCs – if your current deal hasn't ended).

The second option can be done but is a little more complicated, particularly if the person or people don't meet the lender's criteria or can't afford the repayments. If the latter is the case, there may be an option to extend the term or remortgage, or possibly get a guarantor to offer to pay the loan if they can't.

Mortgages with your parents

Parents are often keen to help their children get onto the property ladder, and some may look at joint mortgages as a possible solution.

A parent could apply for a mortgage with their child, but there are a number of potential issues to address.

• Some lenders may require joint borrowers to live in the mortgaged property.
• The parent may already have their own mortgage commitment, which means less of their income can be taken into account.
• The new property could be considered as the parent’s second home, which means they might face extra tax charges.

You can get joint sole proprietor mortgages, which allow someone to take out a mortgage with someone else, but the second person doesn't have ownership of the property. They do have joint responsibility for the mortgage though.

This allows the main applicant to borrow more, but still have full ownership of the home. Essentially, the lender has reassurance that the other person on the mortgage can step in and pay the loan if required.

In that sense, it's similar to a guarantor mortgage – this is when someone acts as a guarantor for a mortgage loan, promising to repay it if the applicant can't for any reason.