Joint Mortgage With a Friend
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Joint Mortgage With a Friend
Kelly McGarry explains how a joint mortgage with a friend works.
Can I have a joint mortgage with a friend? How does it work?
Yes, you absolutely can get a mortgage with a friend. Everything works the same way as if you were applying with a partner or a spouse.
We talk to you both upfront to understand what you’re hoping to achieve, gather all the relevant information and provide you with personalised advice. You’d both need to agree on the way forward, as you’d both be jointly liable for the mortgage – so all the decisions made are shared.
Once you’re happy to go ahead, we’ll make the application to the lender on your behalf and support you both all the way through the mortgage journey.
There are definitely pros and cons in getting a joint mortgage with a friend, and it’s important to appreciate what you’re both getting into together. A mortgage is a long-term commitment, and you’ll be bound to each other financially for a number of years.
What deposit do you need for a joint mortgage with a friend? How much can I borrow?
We typically encourage all clients to have at least a 5% deposit for a mortgage, whether borrowing with a friend, partner, parent or by yourself. There are some 100% mortgage options in certain circumstances, but they usually come with a much higher interest rate.
The higher the deposit you have, the better rates you can access. Lenders price their mortgages based on the level of risk in the loan, which is called the Loan to Value. The lower the loan size compared to the value of the property, the less risk there is for the lender.
What you can borrow is based largely on how much income you and your friend have. Lenders also look at what you spend each month – your credit commitments, any debts, your credit score and what your credit report shows. They decide how much you can borrow after reviewing all of this together.
What are the eligibility criteria for a joint mortgage with a friend?
Again, the usual mortgage criteria apply. The basics are that you’d need to be a UK resident and legally able to buy a property in the UK. You’d need to be over the age of 18, and some lenders do like you to be 21.
You also need to have a deposit saved for the property and to earn an income so you can make the mortgage repayments. Most lenders have an upper age limit at the point the loan expires, which tends to be age 75, but a few will go beyond this.
Normally they need some sort of proof of income after retirement, such as a pension. A handful of lenders don’t actually have an upper age limit at all, so you can still find a mortgage later on in life.
As always, your previous credit history can impact what you can borrow and the rates available to you. We would request a credit report from both of you to assess which lenders we can reach out to.
Does a joint mortgage have to be a 50-50 split?
Technically, it’s not a 50-50 split as there’s 100% liability for each of you. When you sign up for a mortgage with another person, you’re both responsible for all of the debt. How you choose to split the payments between you is totally up to you and your friend.
The legal responsibility for the whole of the debt is on both of you. Essentially, if one of you couldn’t pay the mortgage, the other person is 100% liable.
You can have a different split of property ownership, but it’s not the same with the mortgage. This is why you need to choose a joint mortgage applicant very carefully. Your finances will be linked for the duration of the mortgage term and if the other person doesn’t pay their share, you’ll have to cover the whole repayment – otherwise, your credit score is impacted.
Can one person sell a house with a joint mortgage?
No. You would both need to sign the legal paperwork to agree to the sale of a property you own jointly.
If one of you wants to sell but the other doesn’t, you could apply to the courts to intervene. That’s not easy to do and would take both time and financial resources to make it happen.
The other option would be to buy the other applicant out, but it requires strong affordability to take over the mortgage on a sole basis.
Can you get a joint Buy to Let mortgage with a friend?
You absolutely can. Just like a residential mortgage, you can get a loan with a friend to buy a property to rent out. It’s not uncommon for friends to pool their savings for an investment property like this.
How does remortgaging a joint mortgage with a friend work?
Remortgaging with a friend works the same way as if you buy alone or with a partner. Usually around six months before your deal finishes, you and your friend could look into a new product – either with your current lender, which is called a product transfer, or with an entirely new lender for a full remortgage.
In all cases we’d suggest talking to a broker before you make a decision on a new rate. We have access to deals you can’t get directly, plus we can search thousands of products quickly, saving you lots of time and hassle.
We also sort out all the paperwork for the new mortgage and are on hand to answer any questions about the remortgage process.
When we chat about your options, if the right path for you and your friend is to take a new deal with your current lender, we can arrange a product transfer for you. We don’t charge a fee to do so.
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What is the maximum age for a joint mortgage with a friend?
There’s no fixed upper age limit for borrowers; it varies by lender. Some have an upper age limit of 70 to 80 while others may even go to 90. Some lenders actually don’t have a limit at all – they’re all different. We would look for the right lender based on your circumstances.
What happens if you have a joint mortgage with a friend and the other person dies?
This isn’t a nice thing to think about, especially with all the excitement of purchasing a property with your friend, but it is incredibly important to consider. If your friend were to die, you’d become solely responsible for the entire mortgage debt and making repayments every month.
The type of property ownership makes a difference here, and there are two ways you can own a property. The first is as “Joint Tenants”, where you both own the property equally and the other person’s share would pass to you automatically on their death. This is easier to manage because if you can’t make the repayments on your own, you could sell the property.
The other way you can own a property is as “Tenants in Common”. This way, the other owner can leave their share of the property to a relative or someone else when they die. You would become solely responsible for the mortgage debt, as the new owner wouldn’t be added to the mortgage.
They would, however, need to be involved in any decisions about the property as you now jointly own it with them. They may not choose to contribute to the monthly payments, which could leave you with 100% of the debt, but only part-ownership of the property.
One of the easiest ways to avoid this situation is to take out protection. Then, if one of you were to die, the policy would pay out a lump sum to the remaining owner to pay off the mortgage.
Protection can be overlooked, but it’s a hugely important part of the property buying process. We offer advice on life, income and critical illness cover to all our clients.
Is getting a joint mortgage with a friend a good idea? What are the advantages and disadvantages?
Getting a joint mortgage with a friend can be a good idea, but it really depends on how aligned you are – not just now, but also a few years down the line.
If you’re both really clear on what you want from the property and how long you plan to keep it, it can work really well. In terms of the advantages, you can pool your resources, which is a big deal, as buying in the UK on your own is tough. House prices are high and saving a deposit whilst covering rent and other living costs isn’t easy.
Another pro is that you can share the cost of maintenance and upkeep, which makes ownership more financially manageable. You’ve also got someone to sense-check decisions with, which can make the whole process feel less overwhelming.
A big downside is that your finances become completely linked. If your friend was unable to pay their share of the mortgage, the lender would expect you to cover the full amount. If you’re unable to do that, it will impact your credit score and potentially your ability to borrow in the future.
Another big one is that you would need to agree on every major decision – whether that’s selling the property, refinancing or making changes to the property itself, which can obviously slow things down.
Also, if your relationship changes or you fall out, things can get complicated very quickly. You need to set up a clear exit plan at the outset – confirming what happens if one of you wants to sell and the other doesn’t. Without an agreement in place, that could end up in the courts, which would be time-consuming and expensive.
A joint mortgage can also limit what you can borrow in the future, even if the other person is paying their share. That credit commitment will have an impact on how much you could potentially borrow elsewhere.
Finally, if you’re putting in different amounts, whether that’s the deposit towards the property or your monthly repayments, it’s worth getting that formally recorded so there’s no confusion later on.
Overall, it can be a great way to get on the property ladder, but it only really works if you treat it a bit like a business arrangement, as well as a friendship.
How do you apply for a joint mortgage with a friend? What’s the process?
We’d start with an initial discussion with you and your friend to establish some important facts – how much deposit you have, how much the property is, where you’re looking to buy, your finances in general and the type of mortgage you’re interested in.
Once we know more about your circumstances, we can research the options from lenders. We scan thousands of deals to present you with our advice and our recommendation, and you would discuss it and confirm if you’re happy to go ahead.
We then get you a Decision in Principle, to show that a bank is happy to lend you a specific amount of money. It’s helpful when viewing properties with estate agents, as it shows you’re a serious buyer with funds to back up any offer you make. Offers get made so quickly now that without a Decision in Principle you could miss out on a property you like.
Once you’ve had an offer accepted, we make the full mortgage application on your behalf. We submit all the paperwork and ensure the process goes smoothly. We keep in contact with you, the lender, solicitors and any other connected parties to keep the process moving.
On average it can take two to six months for a sale to go through – we’ll be there to answer questions and help with any issues that arise.
You’ve demonstrated throughout how a mortgage broker can help – any final thoughts?
We’re here to save you time and hassle. Getting a mortgage isn’t something that you do regularly, and if you’re a first-time buyer it can be confusing and time-consuming. We manage all of that on your behalf.
We’ve got over 100 years of collective industry experience to find you the most cost-effective and suitable deal. As a multi-award-winning broker, we can save you money and access mortgage deals you wouldn’t be able to get directly from the lender.
Some rates can be lower, as well, which might save you money over the life of your mortgage. Ultimately, having a professional working on your behalf brings you peace of mind. It’s our job to find the right mortgage for you and to make sure that you can stay in your home should the worst happen, through illness, injury, or no longer being able to work.
Key Takeaways:
- Getting a joint mortgage with a friend works the same as with a partner, and you are both 100% legally liable for the entire debt, meaning if one person cannot pay, the other must cover the full amount.
- To apply, you generally need to be a UK resident over 18 (or 21 for some lenders), have at least a 5% deposit, and earn an income; the amount you can borrow is based on both your combined income and credit history.
- The arrangement requires treating the partnership like a business, as major decisions like selling or remortgaging must be agreed upon by both parties, and you must establish a clear exit plan at the outset to avoid complications if the relationship changes.
- You and your friend can have different splits of property ownership, but this does not change the 100% shared liability for the mortgage debt.
- It is strongly advised to take out protection, such as life insurance, to ensure the mortgage can be paid off if one person dies, especially if you own the property as tenants in common, which could leave you with full debt responsibility but only part-ownership.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY TO LETS.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.
A FEE MAY BE PAYABLE IF WE PROGRESS YOUR APPLICATION. OUR AVERAGE FEE IS AROUND £200 AND THE MAXIMUM YOU MAY PAY IS £995 FOR RETIREMENT INTEREST-ONLY MORTGAGES.
MORTGAGE STYLE LIMITED TRADING AS MORTGAGE STYLE IS AN APPOINTED REPRESENTATIVE OF HL PARTNERSHIP LIMITED WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.