Joint Mortgage With Friend
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Joint Mortgage With Friend
Adam Nunn and Jon Porter talk us through applying for a joint mortgage with a friend.Can I get a joint mortgage with a friend? How does it work?
You can, and there are no major differences from a standard joint mortgage application. The assessment of your personal circumstances is the same as if you are buying with a partner.
You can buy with a friend for residential purposes, where you live together, or you could jointly buy an investment, Buy to Let property. There are just some key things to consider, such as how you own the property and the legal implications around that.
What deposit do you need for a joint mortgage with a friend? How much can I borrow?
As standard with most mortgages, you’re going to need a 5% deposit, although some lenders may accept less on certain schemes. If you’re going down the Buy to Let route, you typically need to be putting down a 25% deposit.
As for the borrowing, it’s all down to the individuals’ incomes. Whether you’re employed or self-employed, your earnings will determine what the borrowing potential is.
What are the eligibility criteria I need to meet for a joint mortgage with a friend?
The thing to emphasise here is that this isn’t a special mortgage scheme. There are no specific criteria you need to fit to get a mortgage with a friend.
It’s very much down to your individual circumstances, just like a standard mortgage with a partner. Lenders will consider each individual’s income, deposit, credit history and the type of property you’re buying. There are multiple lender criteria points, but nothing specific to buying with a friend.
Does a joint mortgage have to be split 50-50?
No. There’s usually a clear reason for you getting a joint mortgage – and you could each have different levels of deposit to contribute, or your incomes could differ.
Generally, people buying together are hoping to improve on what they could buy as individuals. Something to consider is to ensure you have a mutual agreement around how you will pay the mortgage.
A key thing to understand is that you are jointly responsible for the whole mortgage payments. If one of you gets made redundant, for example, and can’t pay, the other party would be responsible for the mortgage payments. You’re jointly liable for the whole mortgage.
Can one person sell a house with a joint mortgage?
If one of you wishes to sell the property, you would have to mutually agree to put the property on the market. Hopefully you will already have a mutual agreement in place that if one of you wants out, the other person accepts the decision.
If you don’t, it could be quite messy. You could find you need legal advice to try and force the sale.
Can you get a joint Buy to Let mortgage with a friend?
Yes. People often do this when investing in a Buy to Let, as larger deposits are required and there are higher associated costs, such as stamp duty. Friends often combine their money and invest together.
How does remortgaging work on a joint mortgage with a friend?
There’s nothing unique to remortgaging with a friend compared with any other type of remortgage. A key point is that any major changes to your circumstances since you bought the property could affect your eligibility for remortgaging.
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What’s the maximum age for a joint mortgage with a friend?
Income is key here, whether it’s employed, self-employed or retirement income. That can affect the overall term of the mortgage.
If you’re employed, the majority of lenders have an age limit of 70. If you’re using retirement income, many lenders can extend beyond that age, but each will have their own criteria on age and different forms of income.
What happens if you have a joint mortgage with a friend and the other person dies?
It’s a horrible scenario to think about, but unfortunately things like this can happen. Ultimately the remaining party is liable for the whole mortgage.
You’ve got this mortgage using two incomes, so losing the other person’s income could have huge implications. That’s where it’s important to have suitable insurances from the get-go, like life insurance, income protection and critical illness insurance.
It’s also really important that you each set up a Will when you buy with a friend. Depending on how you own the property, as joint tenants or tenants in common, that can impact what happens should one of you pass away. It will provide clarity on who benefits from your estate.
Is getting a joint mortgage with a friend a good idea? What are the advantages and disadvantages?
The number one benefit is that you’ll be able to afford a better, more expensive property by enhancing your incomes and deposit, if you’re combining your savings. Together, you can potentially purchase something you couldn’t individually.
One drawback is that obviously this is a long-term agreement. Mortgages can last 25 or 35 years and you may not want to live with a friend for that long. Your future plans can be affected – and people’s lives, circumstances and relationships do change. It’s important to take that all on board.
There are also legal implications if somebody does pass away. It can be complex if you haven’t got things sorted out in the right way.
How do you apply for a joint mortgage with a friend? What’s the process?
Approach a mortgage broker, as there are over 100 lenders out there. Some accept friends for a mortgage together, while others don’t. There are then all the other criteria points to go with it. A mortgage broker will give you holistic advice and go out to the market to find a suitable solution for your requirements.
The key thing is that you’re both applying for the mortgage. You will each have to provide ID, proof of address, proof of income, bank statements, credit reports and proof of your deposit.
How else can a mortgage broker help on a joint mortgage with a friend?
It’s about helping and guiding you through it. We hold your hand throughout the whole process. We give you advice about how this could work, the implications and explaining all the pros and cons. There are certainly positives to friends buying together, but there are also negatives to take into consideration.
It’s also about combining the purchase with Wills, insurances and solicitors. It’s key to get legal advice from a solicitor on how to own the property. You’ll need advice from a Will writer on the implications of how you own the property and what could happen to your equity if one of you were to pass away.
We would talk to you about life insurance and income protection. We can arrange insurance ourselves and can put you in touch with other recommended services as needed.
Key Takeaways:
- Both individuals are jointly responsible for the entire mortgage payment. If one person can’t pay, the other is liable for the full amount.
- Applying for a joint mortgage with a friend is similar to a standard joint application; eligibility depends on each individual’s income, deposit, credit history, and the property type.
- It is crucial to set up a Will and get legal advice from a solicitor on how to own the property (joint tenants vs. tenants in common) to manage implications should one person pass away.
- A 5% deposit is generally needed for residential purchases, while a 25% deposit is typically required for a Buy to Let joint mortgage.
- If one person wishes to sell, a mutual agreement is required to put the property on the market, which is why a pre-arranged agreement is recommended.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.