Joint Mortgage

Joint mortgages are particularly common for couples and partners as they ensure the mortgage and property are owned jointly. They can also be a great way to boost the amount you can borrow compared to as a single applicant.

What is a Joint mortgage?

A joint mortgage is where two or more people take a mortgage together. Both parties jointly own the property and are both responsible for making the monthly repayments to the lender. If one party dies, both the property and the mortgage automatically transfer to the survivor.

Joint mortgages can be a good way to boost the amount a mortgage lender is prepared to provide as there may be two incomes to take into consideration. The income multiples used to estimate the amount that can be borrowed for joint mortgages can be calculated in two ways. If both parties earn a similar income, a joint income multiple is used (e.g. 3.0x). If one party earns significantly more than the other, a single income multiple is used and the second party's income is added on top (e.g. 3.5x +1).

e.g. Using the income multiples above, if two applicants each earn £25,000, they could borrow £150,000 (£50,000 x 3) using the joint income multiple or £112,500 (£25,000 x 3.5 + £25,000) using the single income multiple plus the second income. Hence the maximum they can borrow is £150,000.

If two applicants earn £45,000 and £5,000 respectively, they could borrow £150,000 (£50,000 x 3) using the joint income multiple or £162,500 (£45,000 x 3.5 + £5,000) using the single income multiple plus the second income. Hence the maximum they can borrow is £162,500.

The applicants of a joint mortgage must be the same as the names on the property deed. You cannot have mortgage in one person's name and the deeds in joint name.

It is also important to realise that a joint mortgage means that both parties are responsible for the full amount and not just their portion. If one party does not pay their half of the mortgage, the other party is still liable for the outstanding amount even though they have already paid their share. With any joint mortgage, all borrowers are jointly and severally liable for the entire loan and should consider taking out a legal agreement covering the relationship between the borrowers if required.

Once a mortgage is in joint name, it is quite difficult to take a person off the mortgage as the lender must first be satisfied that the remaining party can meet the repayments by themself. It is often rare that a lender will agree to this as they will be losing a means of collecting repayments.

The benefits of Joint mortgages

• Ideal for couples and partners looking to buy a property together
• A good way of increasing the amount you can borrow

The drawbacks of Joint mortgages

• All parties are jointly and severally liable for the entire loan. If one party doesn't pay, the others are expected to make up the shortfall
• It can be difficult to take a person off a joint mortgage as the lenders agreement must be sought

Summary

• Joint mortgages are when two of more people take a mortgage together

For more information about 'Joint Mortgages', you can call us on 020 8783 1337 or submit an online quote.