Joint Secured Loans
Joint Secured Loans
A joint secured loan is simply a loan taken out by two or more people where all borrowers are jointly and severally liable.
You can add any person to the application, whether a husband or wife, relative, or friend. This is typically done so you can raise more money.
Does A Secured Loan Have To Be In Joint Names?
If a property is jointly owned, any second mortgage lender would expect to see the secured loan application in joint names.
If both borrowers were to apply for a second mortgage, both parties would be jointly responsible and severally liable to make the total mortgage repayments each month.
Joint applicants (up to three) can be added to the secured loan application if the property is in one person's name. The person or people added are often the owner's partners, friends, or family.
By adding other people to a secured loan application, the borrowers can often borrow more as all incomes are included when assessing how much can be raised.
Any adverse credit registered against any person being added can hurt the overall application. It might be that the negative credit results in the interest rate being significantly higher or the application being declined. Ideally, all applicants should have a good credit rating and credit history.
If you are considering taking out a joint mortgage or secured loan, you need to think carefully before taking this step with someone you don’t know well. If one person cannot pay their share of the mortgage, it could result in a missed repayment; this will show on all borrower's credit reports, including yours, regardless of who was responsible.
If you apply for a joint secured loan to borrow money for whatever reason, everyone involved must keep up the monthly repayments on all credit cards and personal loans.
How Does Joint Ownership Work?
There are two ways one or more people can own a property.
If the property is set up on a joint tenant basis, all tenants own the property equally, and profits would be split equally when the property is sold.
The alternative is tenants in common, meaning each person owns a different percentage of the property. This is often more common when a property is purchased with family or friends.
A lawyer draws up a deed of trust that shows the percentage of the property owned by each person.
Advantages Of Joint Mortgages
The biggest advantage of a joint mortgage is that there are often two or more income streams (one for each borrower), meaning you can potentially raise more money.
Another positive is that if one borrower loses their job or is working reduced hours, one borrower is still on a full salary, which could be enough to cover the repayments. It is always wise to consider taking out mortgage protection insurance in case of instances like redundancy or long-term illness.
In many parts of the country where property prices are high, a joint mortgage allows two people to buy a property together, allowing them to get on the property ladder. In the future, they could sell the property and use their share of the equity to buy a new property on their own.
Disadvantages Of Joint Mortgages
If you are considering helping someone obtain a higher mortgage by becoming a party to the loan, you need to be aware of a couple of points:
If, at a later date, you want to buy your own home, any lender will take into account your commitment to the mortgage you have taken out to help your friend, which is likely to mean you will not be able to borrow as much as you would like.
If the person cannot maintain mortgage repayments, this will reflect as a missed repayment on both of your credit reports, making it more difficult for you to borrow in the future.
Adding A Partner To A Second Mortgage Application
With second mortgages, lenders are usually prepared to add a partner who lives with the property owner to the loan application. This is called a joint borrower sole proprietor mortgage, meaning there are joint borrowers but just one property owner.
When applying for a secured loan, the lender will want a three-year address history from the partner being added and evidence that they are living at the address. A bank statement, utility bill or tax document dated within the last three months showing the partner residing at the security address will suffice.
The partner being added will be required to provide their last three wage slips and, in some cases, their most recent P60.
If self-employed, they would be expected to provide their most recent SA302s and tax calculations, or in some cases, they would need to provide a certificate completed by an accountant detailing their income.
When assessing how much the applicants could afford to borrow, the mortgage lender would consider all the money earned by all applicants. In addition, they would consider any credit outgoings such as personal loan repayments, credit card payments, and hire purchase repayments.
A secured loan, also known as a second mortgage, is secured against a property, and as a result, all borrowers need to feel confident that they can maintain repayments throughout the whole term of the loan. Missed repayments may result in the property being repossessed and the owner losing their home.
To find out more about joint secured loans, speak to our team of experts today.