When buying a property with someone else, a joint mortgage is the route most people take. Indeed, more and more people are opting for joint mortgages, enabling them to invest in their future with another person. This can make it easier to get on the property ladder, though it can also mean problems in the long-term if one person wishes to end the agreement.
What are Joint Mortgages?
A joint mortgage means that two or more people are joint owners of a house; such an arrangement requires borrowers to be jointly responsible for the monthly mortgage payments, regardless of who pays what. There are, however, various arrangements that can be made depending on the circumstances of the couple or group taking out a joint mortgage. Borrowers can decide to be joint tenants, whereby the property is owned equally, or they can be tenants in common, meaning the person earning the bigger wage can claim a bigger share if the house is subsequently sold.
Joint mortgage lenders usually offer deals whereby all the borrowers’ incomes are taken into account. The general rule is three times the first income will be lent, plus half of the second income, or alternatively, 2.5 times the joint incomes of all the home buyers.
Joint Mortgage with Parents
Some borrowers may have parental involvement if, for example, they are first time buyers with little money saved. A joint mortgage with parents considers both a child’s and their parents’ incomes, in addition to any outstanding debt left on the parents’ mortgage, which is intended to give a parent some power to help pay off their child’s mortgage. Joint mortgage applications for a child and their parents will usually require the parents’ ages to be considered as these mortgage types are only available for terms ending before the parents retirement ages.
Joint Mortgage Protection Insurance
Though there are many variations of joint mortgages, joint mortgage protection insurance is possibly the most important aspect to consider. As joint mortgages take into account the incomes of all the named individuals, this insurance cover is a security blanket in case monthly repayments cannot be made due to one party’s inability to work. A joint mortgage protection plan will then pay out a monthly benefit to cover repayments, preventing one partner being left with unmanageable debt.
Joint Mortgage Separation
Similarly, splitting up from a partner can also create significant problems as both parties will still remain liable for the joint mortgage. A joint mortgage separation will remove one person’s name from the agreement if they are to move out of the property, though this becomes tricky if a lender refuses to do this if a sole borrower is considered unable to match the monthly payments. This means great care should be taken when signing up for a joint mortgage: splitting up the agreement before mortgage redemption can be ruinous.
To reduce any difficultly in the event of a separation, holders of a joint mortgage are advised to draw up a cohabitation agreement, setting out who contributes what money (including mortgage fees), and what action should be taken if the co-signers split up.
Joint Mortgage Calculators
Before making a joint mortgage application, an online joint mortgage calculator can provide a quote for up to four named parties. As there will be multiple incomes to consider, joint mortgage calculators are there to help tell the combined potential joint mortgage amount the group in question will be entitled to, as well as the mortgage rates they can expect to pay.