A Joint Mortgage is a mortgage taken with a partner, friend, or relative. Everybody named on the Joint Mortgage agreement is fully responsible for all the payments on that mortgage. This means that if someone stops paying their share of the mortgage payment, it still has to be paid by the others named on the mortgage agreement.
Who owns the property when there is a Joint Mortgage?
It is important to separate the ownership of the mortgage and the way the ownership of the property is structured as there can be important differences.
A Joint Mortgage will always be the full responsibility of all the people named on the mortgage agreement; the property, however, can be owned jointly or under an arrangement called “Tenants in Common”.
Here is how the two different arrangements work:
• A Joint Mortgage used to finance a property that is owned jointly.
In this instance those named on the Joint Mortgage are all responsible for all the costs and repayments due on that mortgage. The property is owned jointly and all those named on the title deeds of the property each own all of the property.
•A Joint Mortgage used to finance a property that is owned under a Tenants in Common arrangement.
In this instance, those named on the Joint Mortgage are all responsible for all the costs and repayments due on that mortgage, exactly the same as with a property that is owned jointly.
However, the property will be owned by each person in specified proportions. This can be a useful way of protecting each persons financial interests, especially if one has put significantly more down into the deposit. It is also a way of ensuring that, in the event of death, the deceased share of the property goes to their estate rather than to the remaining property owners as it would if the property was jointly owned.
How many people can you have a Joint Mortgage with?
The vast majority of Joint Mortgages are taken by two people. However, some lenders will allow up to four people to be included on a Joint Mortgage.
Different lenders will have their own rules on the maximum number of people they will allow on a mortgage and every borrower must meet their criteria. If you are wanting to have a Joint Mortgage of more than two people then it is really in your interest to speak with a broker that will know which lenders to approach.
What happens if the person you have a Joint Mortgage with dies (or if you both die)
All lenders will do their utmost to be sympathetic to the situation. Especially if it means that the surviving partner experiences some financial difficulty. The most important thing to do is to inform the lender as soon as possible. That way they can be in a position to be as helpful as they can straightaway.
Many people will have taken life insurance to cover their mortgage when they first bought the house. Typically, it will be sufficient to cover the outstanding balance of the mortgage, but there are many situations where this is not the case.
Where there is sufficient money from a life insurance policy to clear the mortgage, then the situation is quite straightforward. Firstly, both the lender and the insurance company are informed. They will require sight of an original death certificate and, in the case of the life insurance company, they will have a procedure for you to follow that will enable the payment of the sum assured as quickly as possible.
Where the payment is made to is dependant on how the life insurance has been set up. In the case of a joint life policy, the money will be paid to the surviving policyholder. In the case of a single life insurance policy it will be paid to whoever was noted as the beneficiary, or if there is no named beneficiary it will be paid to the deceased estate for distribution according to the deceased’s will. If there is no will, then the laws of intestacy will apply.
Once the payment has been made it is then up to the surviving partner to use it to repay all or part of the outstanding mortgage balance. There is no rule that says the proceeds of a life insurance policy has to be used for that purpose.
In a significant number of cases, there may be insufficient life insurance or even none at all. In these cases then the Joint Mortgage becomes the full responsibly of the surviving borrower or borrowers. It is possible that if the remaining borrower can no longer afford to keep up the payments on the mortgage then the only option would be to sell the property.
Should both borrowers die, then it will fall to whoever is looking after their estates, or the executors of the wills, to decide how to deal with any money from life insurance policies and the likely sale of the property.
What happens when the person you have a Joint Mortgage with wants to get out of the arrangement?
It is not possible to just walk away from a Joint Mortgage without the agreement of the other joint borrowers. In reality, there is nothing to stop them from physically just leaving and stop paying their share. However, the repercussions of doing so will have serious detrimental effects on their future credit history and they will lay themselves open to the possibility of legal action. Finally, their name will still be on the mortgage agreement even if they just try to walk away.
In order to get out of a Joint Mortgage the only sensible course of action is to do it legally, most probably through a solicitor and with the agreement of all parties, including the remaining borrowers and the lender. If agreement cannot be reached or the lender will not allow the change, usually because the remaining borrower has insufficient income to support the loan or fails to meet the lender’s current criteria, then the property may well have to be sold.
Is a Joint Mortgage the same as a Guarantor Mortgage?
A Joint Mortgage and Guarantor Mortgage are very different.
When someone agrees to be a guarantor for a mortgage, they are agreeing to make the payments on that mortgage if, for whatever reason, the borrowers stop making the monthly payments. The guarantor has no ownership or interest in the property on which the mortgage is secured.
Can you get a Joint Mortgage with someone under 18?
The minimum age that is permitted to borrow money to purchase a property is 18; meaning it is not possible to have a Joint Mortgage with someone under this age.
Do you both have to be working to get a Joint Mortgage?
No. Joint Mortgages are regularly given where one of the borrowers is not in employment. Different lenders have different criteria and will look at an application in its entirety.
As long as the application meets a lenders criteria, then a mortgage will be granted based on the affordability shown in the application.
How does a Joint Mortgage work if one party is putting in considerably more than the other for the deposit?
As far as a lender is concerned it does not matter what amounts each of the borrowers has put in, in order to make up the deposit. The amount of mortgage they will decide to offer will be based on the overall amount available for a deposit and the affordability based on the total incomes of each of the borrowers.
However, if joint borrowers are in the position of one party putting in vastly different amounts to the deposit, then it may well be sensible to talk to the solicitor about purchasing the property under a Tenants in Common arrangement. This will allow the person who has put the most into the deposit to legally own a higher percentage of the property and protect their investment.
Can my name be taken off a Joint Mortgage without my permission?
Only in very exceptional circumstances and that would be as a result of a court order. Realistically you cannot have your name removed from a Joint Mortgage without your permission.
Can I get a Joint Mortgage if I am self employed?
Yes. A lender will look at your circumstances such as your income and credit history and decide how much they are willing to lend in exactly the same way as they will look at the circumstances, income, and credit history of someone that is employed.
To learn more about self employed mortgages, click here.
Can I get a Joint Mortgage with my parents?
Yes. There is no reason why anyone can’t arrange a Joint Mortgage with one or both of their parents.
Any lender will take into account the ages of prospective borrowers as well as their income and whether they already have any mortgage commitments. As long as all the proposed borrowers meet the lenders criteria then purchasing with parents does not present any problem in itself.
It might be that a better option would be for the parents to act as a guarantor on the mortgage. This would avoid the situation of the parents having ownership of the property if that was not a desirable outcome. Each potential person thinking of entering this type of arrangement would be well advised to receive their own legal advice.
— Have a question? —
Whether it is just a query about something you have read, or you wish to move on to the next stage of your process, drop us an email and we will be happy to help. Easy, free, and with no obligation