The inflation of property prices has vastly outstripped the increases in standard wages over the years. Nowadays a home buyer may have to purchase a property with a friend or partner in order to be able to afford a property.
This all boils down to measuring affordability. With two parties to look at, lenders will be calculating two incomes rather than one, potentially increasing the maximum mortgage amount. Of course, the mortgage will be more affordable between two people as there will be someone to split the costs with.
In some cases you’ll find that there are mortgage lenders that will allow up to four people co-own a property together. Because there are multiple parties involved, this can cause some debate with changes in circumstances. For example, if one borrower decided to stop their contributions to the group mortgage payments, the lender will still chase the rest of your group for payment.
Further from that one, all the joint owners still hold a legal right to stay within their home unless a court rules otherwise, which means that the person withholding their contribution doesn’t have to leave as they’re still part owner of the property. It’s with this in mind that you need to be very selective about who you buy with.
If one of the parties wishes to increase the mortgage at some point in the future, then all borrowers need to provide their consent. It is best practice to plan ahead for down the line, just for in case someone ends up with a different plan in mind or some circumstances change.
It is common with couples who are married, in civil partnerships or simply cohabiting, to opt for joint tenancy on a mortgage. Tenants in common are often chosen by relatives or friends who are looking to buy a house together. You will need the consent of the other applicant if you are wanting to sell or remortgage the property in the future.
For a tenancy in common will still jointly own the property, but there is no legal requirement to do so in equal shares. This works out best if one party is earning significantly more per month than the other. In addition to this, you can act individually if you are a tenant in common. This means that you can freely sell or give away your share of the property to someone else, if you wish to remove yourself from that setting.
In these cases, if one of you were to unfortunately pass away, the property will be in possession of the other owner on the mortgage. It is recommended to take out life insurance to protect yourself for this down the line. If this were to happen, the mortgage would be repaid at that point.
All mortgage borrowers are jointly and severally liable for the upkeep of the mortgage payments. If one of the party stops paying then all of the parties involved have to make up for the shortfall to prevent possible mortgage arrears.
It’s important to try and get on top of this as early as possible. The reason for this is because falling into arrears could possibly stop you from getting another mortgage further down the line. The best way to view your mortgage situation is to interpret it as you don’t own 50% of a property, you own 100% of it jointly.
If things don’t particularly go how you’d intended them to, whether it be a disagreement with your co-owners or the breakdown of a marriage/relationship, you may look to either remove others from your mortgage, or remove yourself from their mortgage.
When this happens, it is worth speaking to a trusted specialist mortgage advisor in Derby to see what your options might be. For more information on divorce and mortgages, please see our article “divorce & separation mortgage advice.”