Joint income mortgages are extremely common and are the most obvious way of allowing you to buy a property with somebody else. Combining incomes can offer the opportunity for higher borrowing, as two incomes are (usually) higher than one. A joint mortgage means all parties associated, as mortgagees are jointly responsible for ensuring the mortgage payments are made as required. You can decide amongst yourselves how the ownership and any equity is divided, with a tenants’ in common setup for example, but either way, the mortgage will be joint and several liability (which means all applicants are liable for the whole of the debt). Most lenders will accept a joint income mortgage between two parties; however, some will consider applications between as many as four parties. Where there are more than two applicants, most lenders will only take two incomes into account, some will look at three and a few will consider four.
Who can have a joint income mortgage?
A joint income mortgage can be between: - Spouses - Civil partners - Friends - Family members - Business partners - Basically, anyone with a legitimate reason
Joint income mortgages for couples
Typically, most joint residential mortgages are taken out by spouses or civil partners who intend to live together. If both you and your partner are earning an income it makes more sense to consider your combined household income when applying for a mortgage, as this will most likely improve your chances of a lender accepting your application under their affordability criteria.
Joint income mortgages for friends
Most lenders will accept mortgage applications from friends who want to purchase a property either to live together or for buy to let purposes. It is always wise to consider the credit history of each applicant and agreeing on the ownership/equity allocation prior to submitting your application. If one party has a poor credit rating this will affect the entire application. Also, be mindful that your lender will expect all the payments to be made in full, therefore, if one of the joint applicants is unable to make their share of the payments, the other applicant(s) will have to make up the difference. Therein lies the problem with buying with a friend, as if you fall out there may be financial consequences!
Joint income mortgages for family members
Most lenders will accept joint mortgage applications with sole occupancy (where only one of the applicants is planning to live in the property). So, for example, where a parent wishes to help their child get on the property ladder they will make a joint application. This will typically work best when the parent is still earning a regular income and has a much more solid credit background. There are other options available in these circumstances such as guarantor mortgages, and also where a parent can use their property as security against their child’s mortgage. For the right advice in this area, feel free to contact us.
Joint income mortgages for business partners
This type of application can be used when business partners are looking to purchase a buy to let property. It’s up to all the partners involved to ensure that the ownership and equity allocation is agreed before submitting the application. Most lenders will happily consider joint mortgage applications for this purpose.
How is ownership and equity share allocated with a joint income mortgage?
There are basically two types of ownership when you buy a property in joint names: joint tenancy and tenancy in common. Joint tenancy means each party owns an equal right to the property with any profits from a sale shared equally. If one owner dies the remaining owner(s) inherit their share of the property. Spouses and civil partners commonly use joint tenancy. Friends, families and business partners would normally use tenancy in common when taking out a joint income mortgage. This way, applicants are able to legally separate their share of the property by using a trust deed drawn up by a solicitor. Looking for a trusted mortgage broker? Contact us at Salt Finance - we're always ready to help.
