Joint Mortgage with Parents
Get in touch for a free, no-obligation chat about how we might be able to help you.
It's never too early to get in touch
Joint Mortgage with Parents
Adam Nunn and Jon Porter explain how a joint mortgage with parents works.
Can I get a joint mortgage with my parents? Is there an age limit?
Yes, there are various mortgages available that you can arrange with your parents. Age is, of course, a consideration, but each lender will have different limits. It’s worth speaking to a mortgage broker about applying for a mortgage with a parent, because the criteria can vary significantly.
Can I get a mortgage with my parents if they are retired?
Yes, you can. Again, various options are available. One of the key considerations is why they are going on the mortgage.
Is it to utilise their retirement income for affordability purposes? If so, that’s what we need to take into account. Or is it using equity within their property or other assets? We need an understanding of the full picture so we can explore different lenders and criteria.
What’s the difference between Joint Tenants and Tenants in Common?
As Joint Tenants you own the property equally. If one of you was to pass away, the other person has the Right of Survivorship, which means that the other share of the property automatically passes onto you. Likewise, if you sell the property, you would typically be entitled to equal shares of the equity.
With Tenants in Common, you own specific shares in the property. If one of you was putting in 40% of the deposit and the other person was putting in 60%, you might want to protect your initial contributions.
In that scenario, if one of you passes away, their share of the property is passed on to their heirs. It’s always good to have a will in that situation.
How much can you borrow on a joint mortgage with parents?
It’s quite an impossible question to answer because it’s down to the individual circumstances.
With most lenders, it’s down to maximum income multiples, as well as the overall affordability assessment. They normally lend from 4.5 times to 5.5 times your combined income. The overall affordability is a factor as well, as well as the age limits for your parents.
It’s quite an in-depth question, so we need to understand the individual circumstances.
What criteria are needed for a joint mortgage with parents?
The basics of a joint mortgage with your parents are no different to a sole mortgage or a joint mortgage with a partner. You’re ultimately going to need to be able to prove your income. You’re going to need a deposit and to have found a suitable property.
That will determine how much you can afford to borrow. Your credit history might also determine the type of interest rate that is applicable to your circumstances.
Who pays the mortgage on a joint mortgage? Is it split 50-50?
It’s not necessarily split 50-50. I wish I could get my parents to pay my mortgage, that would be lovely, but it doesn’t quite work like that.
Regardless of how the property is owned, whether it’s 50-50 or not, you are jointly and solely responsible for the mortgage. It’s down to you to mutually agree how it will be paid.
It’s very rare that families have equal income and affordability, and can just split it. However, you could pay the mortgage in proportion to your individual incomes. If buying with parents, you might be paying the mortgage solely yourself, or they might contribute. It’s not agreed by the lender, it’s agreed by the individuals.
How do mortgage lenders assess affordability on a joint mortgage with parents?
Age is a key consideration which will affect the length of the mortgage term. Do you need the parents’ income to support the affordability of the application? If so, are they still of working age?
Are they working now and earning a good income? Are they approaching retirement and is the mortgage term going to run beyond that? Lenders do have to factor in any reductions to the household income.
A parent going from employed income to a pension will typically drop down to around a third of their working income, if not less. Lenders need to consider that reduced income once they’ve passed retirement age.
Can you get a joint mortgage with other family and friends?
Yes, and buying a property with friends or family members is becoming more common because it’s more difficult to get on the property ladder.
It’s all down to the individual circumstances and how you set things up legally. Choosing between Joint Tenants and Tenants in Common is a key factor to take into account, especially if you’re buying with friends. You want to make sure that you look after yourselves in the future.
Speak To an Expert
Our expert knowledge ensures that we give you access to the widest range of services available in the financial market to find the right advice for YOU.
What happens if only one person pays the mortgage?
You’re jointly responsible for paying that mortgage.The lender doesn’t control how or who pays. It is really down to you as individuals to be sensible and have a mutual agreement as to how you’re paying that mortgage.
There could be times, certainly if you’re buying with friends or even parents, where one of you is made redundant and is looking for work. You’re going to have to come to some sort of agreement to ensure you can maintain that mortgage payment if someone is unable to pay.
What alternatives to a joint mortgage with parents are there?
We’ve been talking about a joint ownership, joint mortgage between parents and children. We have mentioned friends, as well.
Another option is Joint Borrower Sole Proprietor – which is a joint mortgage, with sole ownership. Just one party is named as an owner of the property. You can utilise other parties’ income to attain a larger mortgage, but this allows for a key factor around how stamp duty works.
If your parents own a property and they take on a second one with you, they will be liable for a higher stamp duty charge. But if it’s sole ownership, the stamp duty is just down to the individual sole owner.
There are a couple of other schemes to consider, as well. If you don’t have a deposit – no savings and you’re not receiving a gift or inheritance – parents can still support children through their own personal assets, such as savings or property. Both can be used as a form of collateral.
Rather than giving that money away or releasing money from the property to give the child, they can use the asset in place of a deposit.
What else do we need to know about getting a joint mortgage with a parent?
Parents quite often call us up or enquire online about guarantor mortgages, which is an old-school term. It’s not typically used these days – Joint Borrower Sole Proprietor is the modern equivalent.
There are lots of options to borrow for a joint mortgage with a parent, so come and have a chat about what could work for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
For specialist tax advice, please refer to an accountant or tax specialist.
