Many home buyers choose to join forces with friends, family or their partner to purchase a property, and therefore need to take out a joint mortgage. There are plenty of reasons why joint ownership mortgages are an attractive option. Often buying with someone else is the only way to make owning a home affordable, and by pooling your resources you might be able to buy a better property than if you were buying on your own. Many people therefore decide to buy with a friend, partner, or with their parents – or perhaps you might be a parent yourself wanting to help your child get onto the property ladder. Is it easier to get a joint mortgage?
Whoever you are considering buying with, joint mortgages can make it much easier to buy a property. Here is what you need to know.
A joint ownership mortgage is a mortgage you take out with someone else, whether that is a partner, friend, family member, or business partner. Both parties will be jointly liable for the mortgage debt. So if one person cannot keep up with their share of the payments, the other will have to make up any shortfall.
Most take out joint mortgages with one other person, although some lenders will allow up to four people to take out a mortgage together, with each owner named on the property deeds. Remember that taking out a mortgage with someone else is a big long term financial commitment, so it is important to trust the person or people you are buying with.
When you take out a joint mortgage, it is important to think about how you will structure your ownership of the property. When you fill out your mortgage application, you will be asked a number of questions. One will be whether you are applying as joint tenants in common.
Each option has its strengths and weaknesses. Thus you will need to consider carefully which is most appropriate. you base this on your individual circumstances. If you are uncertain how to proceed, your solicitor will be able to advise you. They will list the most suitable way to set the property ownership up. They will also consider any potential tax liabilities that may arise. Below we explain how the different options work.
Taking out a joint tenant’s mortgage tends to be the most popular option if you are buying a property with another person, because it means each of you will both have equal rights to the whole property. That means that when the property is sold, any profits are split among you equally.
Many people do not realise however, that in the event of a death the property will automatically pass on to the other owner. And not to their family or any other beneficiary. This is the case even if you stated in your will that you wanted to leave your share of the property to someone other than the person you own it with. This route is therefore often taken by married couples. Or those in long term relationships. Those who would want the property to transfer in their partner in the event of their death anyway.
If you decide to own your property as tenants in common, this means that each party owns a specified share in the property. Should one of you wish to move on in future, you can sell that share in the property. Or if you die, you pass the share to a beneficiary named in your will.
The shares you own do not have to be equal. So for example, one of you might own a 60% share in the property. Whilst the other person might one a 40% share. Your solicitors will draw up what is known as a deed of trust which specified what percentage of the property you each own.