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04 Aug 2021
Chris Torney Chris Torney

Everything you need to know about joint mortgages

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People sat around having a nice time in their house that they own together.

We look at joint mortgages, their pros and cons, and how they differ from other types of mortgage.

Rising property prices mean it’s more common for people to join forces to buy a new house or flat.

This is where joint mortgages come in. A joint mortgage is an agreement between a lender – a bank or building society – and two or more buyers to finance a property purchase.

 

What is a joint mortgage?

The joint owners share responsibility for making monthly mortgage repayments.

Borrowers can work out between themselves what proportion of repayments they make each month.

It’s also possible for joint mortgages to be paid by just one person or a couple of people in the group.

Joint mortgages are most commonly taken out by couples.

This is partly to share the financial responsibility, but also to give them shared ownership of the property.

But they can also be used by two friends or relatives to use their collective buying power to purchase a more expensive home.

It’s possible for groups of three or even four people to take out a joint mortgage, but fewer lenders offer this as an option.

 

We don't compare this type of mortgage - this guide is for informational purposes only. But you can compare mortgages.

Get more information about mortgages

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The advantages of joint mortgages

The main benefit of taking out a joint mortgage is that it can increase the amount you are allowed to borrow.

With a single-applicant home loan, lenders set their maximum mortgage amount according to that borrower’s income.

With a joint mortgage, on the other hand, at least two applicants’ earnings can be taken into account.

This means you could be in line for a bigger loan. For some people, a joint mortgage may be the only way they can get onto the property ladder.

As joint borrowers, you could pool your savings to use as a deposit. The more money you put down as a deposit, the less you’d have to borrow and the lower your monthly repayments might be.

A bigger deposit as a proportion of your property’s value could also reduce what you pay in interest overall– again, this might mean lower repayments.

To give you an idea of how much you and your co-buyer could borrow based on your income, use our mortgage calculator

For groups of three or four, you may need to contact the lender or a mortgage broker directly for more guidance.

 

Potential problems

Joint mortgages aren’t without possible drawbacks.

If you’re entering into a joint-mortgage agreement with someone who has a less than perfect credit record, it could affect how much you could borrow together.

And by being formally associated with someone who has had credit problems, your own credit record could be tarnished to some extent.

You should also bear in mind that all the borrowers involved in a joint mortgage agreement are liable for monthly repayments.

So if one person stops making their share of repayments, the lender could take action against all or both of you. Your own credit record could be damaged too.

 

Ending a joint mortgage agreement

Particularly if you’re buying with a friend or friends, it’s worth thinking about what would happen if someone wants to move out.

Possible solutions could involve selling the home or transferring ownership to the other borrowers.

These options could have pitfalls.

For example, if you need to sell a property before the initial mortgage period is up, you could be hit with an early-repayment fee of potentially thousands of pounds.

It might be worth getting legal advice and drawing up an agreement in advance.  This could set out what would happen if someone wants to give up their share of the home.

 

Joint tenants versus tenants in common

In legal terms there are two main ways that multiple people can own a residential property - as joint tenants or as tenants in common.

 

Joint tenants

This is where the people involved jointly own the property and are regarded as a single legal entity.

If you wish to sell the property, for example, everyone has to agree. And if one person dies, the property passes to the other owner or owners. Joint tenancies are most commonly used for married couples.

In Scotland, rather than joint tenants the legal system uses the term ‘joint owners with a survivorship clause’ which is probably more self-explanatory.

 

Tenants in common

This means that each joint owner has a claim to a separate share of the property.

These shares don’t have to be of equal size. This option is seen more when groups of friends or relatives buy together.

Unlike joint tenants, tenants in common can leave their share of the property to anyone they like in their will.

In theory, tenants in common would be able to take out their own mortgage for their own share. But this is rare and joint mortgages are usually the most common.

Bear in mind though that whatever form of ownership you choose, you’ll still be jointly liable to repayments due on any joint mortgage you sign up for.

 

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 in theory 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.

Guarantor mortgages are another option for those who’d like their parents to support their mortgage application.

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