Multi Person Mortgage
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Your home may be repossessed if you do not keep up repayments on your mortgage
Multi Person Mortgage
What is a multi-person mortgage or a multi-applicant mortgage?
There isn’t actually a mortgage specifically labeled as being for multi applicants but, provided all borrowers meet lenders’ basic criteria around age, where you live, income levels and credit worthiness, you can have multiple people on many standard mortgages.
Most lenders have a limit of four people on a mortgage. It’s more common for people buying a home to get a mortgage as a single person or jointly as a couple. But we do see more people applying together to afford a property.
In some cases, we see clients buying a bigger property with a parent who might need care or support later in life. We also sometimes see friends deciding to buy together, as pooling their resources gives them a bigger deposit and might mean they can borrow more.
How many people can be named on a mortgage? How does this differ from a joint mortgage?
You can usually have up to four named people on a mortgage. Technically, with more than one person on a mortgage it is usually referred to as a joint mortgage – as each person would be jointly liable for the debt. But we usually think about a joint mortgage being just for two people.
Who is eligible for a multi-applicant or multi-person mortgage?
The usual rules apply on who can get a mortgage, whether that’s a single person or a joint application of two, three or four people. The applicant should be above the minimum age of 18 years old, have the right to live and work in the UK, and meet the lender’s specific criteria around things like income, credit history and deposit.
How do multi-applicant mortgages differ from standard mortgages?
As we’ve covered already, the only real difference between multi-applicant mortgages and standard mortgages are the number of people applying to borrow together.
Other variables including the type of mortgage you can get, whether it be fixed or tracker, and how long you want to borrow for, can be selected to suit your circumstances.
What types of properties can you get a multi-person mortgage on?
The type of property you’re buying is not affected by the number of people applying for a mortgage, although the maximum number of people who can be named as legal owners is four.
There are the usual criteria around what lenders will accept as security for a loan. As long as the property is habitable, it’s usually fine. That means it should be intact, with no significant damage, and have a working kitchen and bathroom – as a minimum.
How is ownership split?
Ownership of the property you’re buying together will be set out in the title deeds. The split tends to be equal, but you can amend the share each person has by buying as ‘tenants in common’. This is often used when people buying together put in various levels of deposit.
How much can you borrow for a multi-applicant mortgage?
How much you can borrow depends on what each applicant earns. However, even with three or four people applying on a multi-person mortgage, lenders often only consider the two highest earners’ income when deciding how much to lend.
They’ll add up the two highest salaries or self-employed incomes, and usually multiply by 4.5 to calculate how much they’re prepared to lend. This can go up to five or even six times in specific scenarios, but we do have to take account of affordability and any debts or commitments those clients already have.
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What are the benefits of a multi-applicant mortgage? Are there any risks?
If you buy with other people, you can pool your savings and have a bigger deposit. That means you could potentially buy a bigger house or flat than you could afford on your own.
As mentioned already, the two highest earners’ incomes are usually factored into lending decisions. If you don’t earn as much as the others, it can mean you’re able to buy a property when otherwise you may not have been able to. Having a bigger deposit also means you’ll qualify for lower rates.
Investing in property is a huge financial commitment, whether you’re planning to live together or rent out to tenants. Your credit score will be linked to your co-applicants’ credit scores and any negative activity on their files could damage your own score.
You also need to think carefully about what would happen if one of you wanted to sell the property or if you fell out with another person living there. How would you reconcile any differences? What would you do about selling the property if required?
Finally, it’s worth noting that you’re all responsible for the debt. If one person can’t contribute their share of the mortgage repayment in one month, it will be down to the rest of you to cover that.
Are there any alternative options to a multi-applicant mortgage?
Yes, but that really depends on what you’re trying to achieve. If you’re looking to increase what you can borrow to make owning a house more possible, there are some alternatives to multi-applicant mortgages to consider.
A guarantor mortgage is one example. This is where a family member, usually a parent, agrees to make mortgage repayments if the borrower is unable to. The guarantor doesn’t take a stake in the property but is liable for the repayment if the borrower can’t pay.
Then there’s Joint Borrower Sole Proprietor, which is a bit like a guarantor mortgage. This type of mortgage includes a close family member, usually a parent or two parents, who are named on the mortgage alongside the main borrower.
The difference in this case is that they can make payments on the mortgage from the start, whereas the guarantor only steps in when the main borrower can’t pay.
Then you’ve got the Family Offset mortgage. Unlike Joint Borrower Sole Proprietor or guarantor mortgages, a family offset mortgage doesn’t include another person contributing to mortgage repayments. Instead, family members use their savings to offset what the borrower needs to borrow.
It might be easier to use an example. Imagine you want to buy a property using a mortgage of £350,000. If your parents had £100,000 in savings, they could allocate that to a savings account linked to your mortgage. The ownership of that money stays with them, but it means you’ll only pay interest on £250,000 of the mortgage balance.
Essentially, your parents are sacrificing the interest they would have earned, and you pay no interest on the corresponding amount of your mortgage balance.
How can a mortgage broker help here? What else do we need to know about multi-person mortgages?
It’s our job to help make sense of your options. We’ll start by talking to you and the other applicants about what you’re trying to achieve, what your goals are and the right options to help you get there.
Then, after we’ve researched a wide range of mortgage deals, some of which are only available to us as brokers, we’ll make a recommendation based on what you need. Once you’ve considered our advice and agreed to go ahead, we’ll handle the whole application process with the lender for you.
If there are as many as four of you on the mortgage, the application process could take more time, so having us to handle it for you should ease the administrative burden. Once your offer is ready, we’ll make sure everyone involved in your mortgage and overall property purchase are completing their tasks on time so you can get your keys and move in as quickly as possible.
We’ll get in touch with the lender, solicitor, surveyor, the estate agent and anyone else on the property team as needed. Finally, we’ll help you achieve lasting protection and security by explaining which insurance policies are most applicable to you. You’ll be able to make an informed judgment when it comes to protecting your family and ensuring your home remains yours, even if life doesn’t go to plan.
There may be a fee for mortgage advice. The precise amount of the fee will depend on your circumstances and will be discussed and agreed with you at the earliest opportunity. Typically, in most cases, our fee will be £495. We charge £595 for bridging and adverse credit cases; and £995 for Later Life Lending.
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Registered Office: Elm Tree Farm Estate, The Sheepway, Portbury, Bristol, BS20 7TF.
Mortgage Style Ltd, trading as Mortgage Style, is an appointed representative of the H L Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.