Joint Mortgages Explained

13/10/2019

A joint mortgage is a home loan that you will share with other people in every respect, including equity, repayments, liabilities and obligations. What this means is that you and the people you share this mortgage with, will all be responsible for keeping up with the joint loan’s repayments. You and the people with which you share the mortgage can all decide how to divide up the property’s equity.

Getting a mortgage is one of the biggest financial moves of a person’s life and so it is important to be aware of and understand all of the different types of mortgages available to you; how they work and which would best suit your needs and financial position. A joint mortgage is no exception to this rule, with many homeowners benefitting greatly from this type of secured home loan.

How Much Can You Borrow with a Joint Mortgage?

With joint mortgages, homeowners often find that they can borrow more compared to a standard mortgage because you are combining your income and salary with that of one or more additional applicants. Many joint mortgage holders have found that by sharing the home loan, they are able to extend their price range and go for more expensive properties, which in the long run also means it is possible to improve the value of the property further to increase the value by substantially more.

Lenders will take all applicants’ income into great consideration when evaluating a mortgage application, as this is a major mortgage affordability factor and one of the key signs as to whether or not they will be able to keep up with repayments. This is taken into consideration alongside your credit score, and other additional factors that reflect your financial situation and the way in which you manage your money.

How Much of the House Do You Own?

You and the people you are sharing the mortgage with can decide how the equity is divided up. As it is common for couples to take out a joint mortgage, the ownership is typically split in half, so each borrower owns 50% of the mortgage and the property’s equity. This means that both borrowers are therefore responsible for 50% of the mortgage, and are each required to make half of the home loan repayments each month.

Each borrower is responsible for their own individual percentage of the mortgage. However, if one borrower fails to keep up with repayments, other borrowers attached to the mortgage may be pursued for the missed repayments, acting as a sort of mortgage guarantor.

It is therefore vital to ensure that you only apply for a joint mortgage with those who are financially responsible, stable, and thereby able to keep up with the loan repayments. As with any mortgage, failure to keep up with your repayments and obligations may not just risk all mortgage holders’ credit scores, but can also lead to property repossession proceedings being undertaken by the lender.

Who is Eligible for Joint Mortgages?

Typical applicants for joint mortgages are ‘couples,’ which extends to those who are married and in civil partnerships, as well as unmarried, long-term couples.

Whilst couples may be the typical candidates, they are not the only ones who will apply for a joint mortgage. Joint mortgages can be taken out by two, three, and sometimes four people. However, not every mortgage provider will offer this service, and you will have to double check with lenders before trying to apply.

Other examples of joint mortgage applicants include:

Family Members – Whether intending to live with you or simply wanting to help you to get on the property ladder, you can apply for a joint mortgage with a family member.

Friends – You can also apply for a joint mortgage with a friend, whether they are intending to live with you, help you to get on the property ladder, or simply making an investment in the property. 

Business Partners – You can also get a joint mortgage with a business partner wanting to invest in the property.

It is worth noting that joint mortgages are not just for first time buyers and can also be utilised by homeowners looking to remortgage. There are many different scenarios that can warrant a joint mortgage, with many different situations that can reap the benefits from this type of home loan.

How Do I Apply for a Joint Mortgage?

You can find the best deals on joint mortgages by going to specialist mortgage brokers as well as looking on any of the available mortgage comparison sites. It is best to know all the details of your situation, and know the exact type of joint home loan you’re looking for before searching on these sites prior to actually applying.

Upon finding the best mortgage deal for you, all that is left to do is go through the mortgage application process. This process will typically require various different documents from the applicants. To make the application as quick and simple as possible, it’s best to find out what documentation the mortgage providers will require and to organise these ahead of applying.

By understanding how a joint mortgage works, homeowners can make more informed decisions on the type of home loan they apply for, and what to expect from this type of mortgage loan.

As a mortgage is secured against your home, your home could be repossessed if you do not keep up the mortgage repayments. Think carefully before securing other debts against your home.

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