Joint Mortgage with Friends: Your Path to Homeownership

What do you mean by a joint mortgage?

A joint mortgage is when two or more people apply for a mortgage together to buy a property. Each person is equally responsible for making the monthly mortgage payments and other related expenses. This means that all parties are legally responsible for the debt, and if one person fails to make their share of the payments, it could affect everyone’s credit rating.

When taking out a joint mortgage with a friend, you must consider the implications carefully. It’s important to have open and honest conversations about your financial situation, future plans, and how you will handle any potential disagreements or changes in circumstances.

Before applying for a joint mortgage with a friend, seeking legal advice is crucial. A solicitor can help you understand your rights and responsibilities, as well as draft a legal agreement outlining each person’s obligations.

Can I have a joint mortgage with friends?

Although the answer is a resounding yes, you’ll still have to bear in mind some of the additional difficulties you are likely to encounter in securing a joint mortgage with a friend – not least because you will probably have different incomes. One might be more capable than the other of meeting the financial commitment.

You will have some initial – critical – questions about whether your friend is someone with whom you get on well enough. For example, you’ll have to decide whether it’s possible not just to live in the same house together but also share in the ownership of the same home. Will the relationship withstand a joint mortgage with your friend?

How does a friend’s mortgage work?

A mortgage with friends in the UK is designed to let you borrow more than your single salary would typically allow, with a mortgage that is secured against a home whose ownership is shared with a friend or friends.

Many lenders will permit shared ownershipA scheme where a borrower purchases a share of a property an... and a shared mortgage with up to a maximum of four individuals as parties to the same mortgage agreement.

When considering the application, lenders typically consider the two biggest salaries and base the offer on the amount of any mortgage advance based on those incomes.

Suppose you are thinking of a joint mortgage with a friend or friends. In that case, you must remember that every person signing up for the loan is jointly and severally responsible for paying the fees to arrange the advance and making the monthly mortgage repayments.

That means that if one of the friends participating in your mortgage fails to make the necessary payments, you become responsible for doing so – your lender is entitled to demand payment from the remaining parties to the mortgage agreement.

Although the financial responsibilities are shared, each share isn’t necessarily equal. If there are just the two of you, for instance, you don’t necessarily each own a half of the property—you can agree on different, unequal shares.

However, sharing financial responsibility remains a very serious business that links your and your friend’s financial activities. Since you are in it together, whatever you do to affect your credit score or theirs impacts both of you. If they default on some other loan, for instance, it could affect your credit standing the next time you make any such application.

Bearing all that in mind, the formal process of applying for a joint mortgage with a friend follows more or less the same route as anyone else’s application. The main difference is that each party to any shared mortgage must meet and comply with the lender’s particular policies and requirements.

Since these will differ from one lender to another, you might want to engage the services of an independent mortgage broker for professional guidance.

Who can take out a joint mortgage?

There are no hard and fast rules about who can participate in a shared mortgage. Typically – and for obvious reasons – most are arranged by married or unmarried couples, including those in civil relationships. But these are by no means the exclusive participants. For example, in addition to a joint mortgage with a wife, husband, or civil partner, you might want one with:

• your boyfriend or girlfriend;
• a family member or relative;
• a friend or friends – up to a total of three others, or even.
• a business partner.

Is it a good idea to get a multi-applicant mortgage from a friend?

We’ve already touched on the importance of your being certain that this is a friend – or friends – with whom you are not just sharing a living space but also the lasting ownership of your own home.

Even if you’re reasonably confident in the strength of the relationship – and your tolerance of each other’s habits – you might want to practice a trial run of living together for at least six months before entering the financial commitment of a shared mortgage.

What do I need to consider before getting a house with friends?

Your immediate concern will be the financial relationship you create with someone else when you enter a mortgage agreement together. As we’ve mentioned, that relationship can potentially affect everyone involved in the shared mortgage’s credit status. Be prepared to share details about your credit standing with your friends – with the reasonable expectation that they will also share theirs.

Seek legal and financial advice on the implications of any shared mortgage agreement you propose to enter. In particular, you might all want to agree on what happens if someone wants to leave the mortgage agreement – if they can no longer afford their share of the monthly repayments, for example.

You might also want to write your will – to avoid any doubts in the event of your or a friend’s death.

What are the documents required for a joint mortgage with friends?

When applying for a joint mortgage with friends, you will need to gather various documents to support your application. These documents typically include proof of income, such as recent pay stubs or tax returns, proof of employment, bank statementsA record of a borrower's financial transactions often requir... showing assets and liabilities, and identification documents, such as driver’s licenses or passports.

In addition to financial documentation, you may also need to provide information about the property you wish to purchase, such as a sales contract or property appraisal. It is important to ensure that all parties involved in the joint mortgage are able to provide these documents promptly to avoid any delays in the application process.

Overall, while getting a joint mortgage with friends can be a great way to enter the property market and share the financial burden of homeownership, it is important to carefully consider all aspects of the agreement before proceeding. Seek professional advice, be transparent about finances, and have a clear plan for potential changes in circumstances. With proper planning and communication, a joint mortgage with friends can be a successful and rewarding experience.

Next Steps

A joint mortgage with a friend or friends can be a great way to ease that first step on the housing ladder.

Be aware of the several issues you need to consider before entering into any such agreement, however, and consider consulting experienced professionals such as ourselves at NeedingAdvice.co.uk.

FAQs- Joint mortgage with friends

Joint Mortgage

What exactly is a joint mortgage?

A joint mortgage is when two or more people, like friends or family, come together to get a mortgage. This helps them share the cost and responsibility of paying for a home.

Details on Mortgage Terms and Types

What types of mortgages are available for friends buying together?

Friends can opt for either a joint tenant or tenants in the common type of mortgage. These are common styles of mortgages that determine how property ownership is divided and managed.

Applying for a Joint Mortgage

How do we start the joint mortgage application process?

First, you and your friends should talk to a mortgage adviser or mortgage broker. They will help you understand what mortgage deal fits your combined income and personal circumstances. You’ll need to complete a mortgage application and pass a credit checkA check of a borrower's credit history, which is used by mor....

Financial Aspects of Joint Mortgages

How much can we borrow with a joint mortgage?

The amount you can borrow depends on your combined income, credit history, and the house price of the property you are interested in. A mortgage affordability calculatorWhat is an Affordability Calculator? An affordability calcul... can provide an estimate based on these factors.

Responsibilities and Payments

What happens with our monthly mortgage payments?

Each joint borrower is responsible for their part of the monthly mortgage repayment. This should be planned according to how much each person can afford and their share in the mortgage agreement.

Advantages of Getting a Mortgage with Friends

Are there benefits to getting a mortgage with a friend instead of alone?

Yes, getting a mortgage with friends can help you manage the cost of a more expensive property since you’re pooling resources. It also helps in qualifying for better mortgage rates due to higher total income.

Risks and Legal Considerations

What are the risks of a joint mortgage?

The main risk is joint responsibility for the loan. If one person cannot make their mortgage payment, the others must cover the amount to avoid defaulting on the mortgage. Legal advice is recommended to create a joint mortgage agreement that outlines everyone’s responsibilities.

Leaving a Joint Mortgage

What if I want to get out of our joint mortgage?

To exit a joint mortgage, you could sell the property and split the proceeds, one person could buy the others out, or you could transfer the mortgage to one person with the lender’s approval. This often requires a new mortgage application by the remaining person.

Credit Considerations

How does a joint mortgage affect my credit score?

A joint mortgage appears on your credit report. If the mortgage is paid on time, your credit rating can be improved. However, any missed payments can negatively affect the credit scores of all borrowers involved.

Additional Support

Where can we get more advice on joint mortgages?

It’s a good idea to consult with qualified mortgage professionals or advisers on mortgage options and the best mortgage rates calculator to use. They can provide detailed mortgage advice tailored to your financial link and the lending criterium of mortgage providers.