How Do Joint Mortgages Work?

A joint mortgage is when two more people borrow to buy a house together, sharing the responsibility for the loan and its repayments alongside the shared ownership of the property.

For decades it has been the most common way for married couples or those in a civil partnership to buy a home, but can also be used by friends or family members to buy together - and is even used by investors looking to join together to make an investment.

The concept is extremely simple, but as with anything, there’s a little expertise needed to understand the finer details. We’re here at Clifton Private Finance to dive into the details with this clear and comprehensive look into joint mortgages.

Key Takeaways

• A joint mortgage allows two or more people to buy a property together, combining their incomes to maximise their borrowing potential.
• All applicants are ‘jointly and severally liable’ - meaning each person is legally responsible for the full repayment if the other partner cannot pay their share.
• Property ownership and mortgage liability don’t always line up exactly - the loan to buy the property doesn’t define who owns what.
• Couples usually use simple 50/50 split joint tenant mortgages, though other structures exist through tenants in common mortgages.
• Most lenders set a borrowing limit of 4.5x your income - Clifton Private Finance can often secure mortgages at 5x, 5.5x, or 6x LTI through specialist lenders.

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Joint Mortgage Responsibility vs. Property Ownership

When considering joint mortgages, it is important to make a clear distinction between those responsible for the mortgage and the owners of the house. While in most cases, the two are the same, with a share in the property that matches their share of the mortgage, this may not always be the case.

A mortgage is the loan secured against the property - it doesn’t define ownership.

Consider the following examples:

• Common equality - Anita and John buy a house with a joint mortgage and a deposit they contributed to equally. In this case, property ownership and mortgage liability are likely to be the same.
• Lop-sided repayments - Lily and Helen buy a flat together with a joint mortgage. Helen pays more each month as she has a better salary. However, even though her income means she can afford a greater chunk of the repayments, the ownership of the home remains an equal split between them.
• Previous part-ownership - Simon and Terri take out a joint mortgage to buy Simon’s previous partner’s share of the home. Here, the mortgage responsibility is split 50/50, but the actual property ownership will be heavily biased in favour of Simon, who has already bought half the house, resulting in a 75/25 ownership split.
• Deposit inequality - Jude and Ling buy a home with a joint mortgage, but the entire deposit was provided by Ling. This potentially gives her a larger overall share of the property equity depending on the legal arrangement.
• Shared ownership - Marcus and Rachel buy a home that has 50% shared ownership, using a joint mortgage. Their share of the property is equal between them, but they own only 25% of the property value each. The shared ownership company retains the remaining 50%.
• Tenants in common - Sarah, Louise, and Amira buy a home together as friends with a tenants in common joint mortgage. With equal shares, they each own a third of the property and have a third responsibility for the mortgage.

At Clifton Private Finance, we can structure your mortgage to meet your financial needs, and work with your legal advisors to ensure the final property equity represents your aims.

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How Joint Mortgages Work

1 - Jointly and Severally Liable

The phrase ‘jointly and severally liable’ appears in joint mortgage paperwork. It means that if one person doesn’t pay, the other person (or people) named on the mortgage must cover the payment.

Though you may have your own arrangements regarding who pays what towards the mortgage (for example, one of you pays the mortgage, while the other covers household bills), the mortgage lender considers you both legally responsible.

2 - Lenders Combine Income and Credit Histories

When it comes to evaluating your mortgage application, lenders assess both applicants equally, merging your finances to form their risk assessment. This means:

• Salaries and other incomes are added together - Perhaps the greatest benefit to a joint mortgage is the greater buying power. Lenders will simply add your incomes together to calculate your borrowing limit.
• The lowest credit score will be most significant - If one of you has a poor credit history, for example with CCJs or IVAs on the report, this will affect the application negatively. While a positive credit report for the other applicant helps lift the evaluation, the impact of a negative score is often most heavily weighed. A partner with a damaging credit history is one of the most common reasons for couples to not choose a joint mortgage.
• One partner’s income stability can have a huge impact - A long-term PAYE salary can considerably strengthen the application. This can help self-employed applicants who are struggling to prove income, as a joint mortgage with a salaried partner adds a significant stabilising factor.

3 - Joint Mortgages are the Same as Single Applications

There’s no difference in the mortgage product offered to joint applicants and single applicants, with similar interest rates and terms.

The only change is in how affordability is calculated for underwriting purposes (as described above). Credit scores, income, and affordability stress tests, however, will impact rates.

Who Can Get a Joint Mortgage

Many people mistakenly believe that a joint mortgage is a specific product for married couples or those in a civil partnership.

While these are the most common applicants, in truth a joint mortgage can be applied for by any two or more people looking to buy property together. This includes:

• Married couples or civil partners
• Unmarried couples buying a home together
• Friends or siblings looking to pool their resources to get on the property ladder
• Parents buying property with children to boost affordability
• Investor partnerships purchasing rental properties

From a lender’s perspective, the relationship between the applicants is somewhat irrelevant. All they are truly interested in is whether the mortgage repayments can be clearly met, which is checked through affordability calculations and stress tests. Standard rules, however, do apply - for example, all applicants must be over 18.

Equally, lenders will not reject a single applicant mortgage if one married partner applies without involving the other, but they will still ask about your household circumstances to evaluate expenses, your financial responsibilities, and overall affordability.

How Much Can You Borrow With a Joint Mortgage?

One of the biggest advantages of a joint mortgage is the increase in buying power. With your incomes combined, the level of borrowing increases considerably.

• Lenders typically offer up to 4.5x your combined income - known as the Loan-to-Income (LTI) ratio.
• With Clifton Private Finance on your side, some lenders will offer up to 5x or even 6x LTI - In the right circumstances, we can help you secure a sizeable 6x LTI mortgage.
• Specialist lenders offer tailored mortgages to suit your circumstances - While mainstream banks can be inflexible, mortgage lenders with specialist understanding offer joint mortgages tailored to your needs. This may include when evaluating complex multiple income streams, working with fluctuating self-employment figures, or dealing with bad credit histories. Speak to a CPF advisor to gain access to larger joint mortgages with specialist lenders.

Other factors that may affect your borrowing size include:

• Existing debt
• Deposit size
• Loan-to-value (LTV)
• Income stability
• Number of dependants
• Credit history

Joint Tenants vs. Tenants in Common

Joint mortgages fall into two categories: joint tenant mortgages and tenants in common mortgages. When most people talk of a joint mortgage, they are thinking of the standard joint tenant mortgage, designed for couples to buy a property with equal shares.

Modern needs, however, can be more complicated. The tenants in common mortgage is a flexible shares-based mortgage that can be tailored to fit your needs with any number of applicants (though usually four or fewer).

For example, consider the friend group of Sally, Mike, Taylor, and Gregor. For many years, these friends have been renting separate flats or rooms in house shares. One day, they discuss the difficulties they all face getting on the housing market, and decide to join together to buy a home that will get them on the property ladder.

From the outset, they make their intentions clear:

• Sally just wants a springboard to build equity. She’s got a moderate salary of £26,500 and only £3,000 in savings, but is happy to take a small share.
• Mike wants a home that’s his until he ends up in a long-term relationship, at which point he’s happy to sell his share and move on. He has a good income of £40,000, £11,000 in savings and is willing to pull his weight.
• Taylor and Gregor are a couple. They want to buy a home together that could conceivably become a family home in the future and see this as an opportunity to live with friends for a few years until all their circumstances change. Taylor earns £30,000, while Gregor brings in £39,000. Together they have saved up £19,000.

Together they search for a suitable house. With a total deposit of £33,000 if they pool their savings, they are looking for a property valued at £330,000 or below for a 90% LTV mortgage. Their combined salary is £135,500, giving them a potential borrowing level over £600,000 at 4.5x LTI.

They find a house they all love for £380,000. Sally contacts her parents for help, and they agree to lend her an additional £5,000 for the deposit, making a 90% LTV mortgage possible, with a total monthly repayment of £1,900.

They decide on the following split:                                              

Tenants in Common Mortgage

After two years together, all of the friends are in a better financial position. Sally moves out first, selling her share to Taylor and Gregor, and the three remaining tenants remortgage accordingly.

A year later, Mike enters into a relationship and also wants to move out, however Taylor and Gregor don’t quite have the on-paper affordability to buy him out.

Because all three remain jointly liable, Taylor and Gregor can cover his repayments without immediately buying Mike out - though his name remains on the mortgage until remortgaging.

A year after that, with a baby on the way, they remortgage fully, converting to a joint tenant mortgage and paying Mike his fair share.

The Legal Differences Between Joint Tenants and Tenants in Common

One important consideration for those considering tenants in common over joint tenants is the legal paperwork required.

A joint tenants mortgage has a clear line of equal ownership and automatic inheritance if one partner dies - the property immediately becomes wholly owned by the surviving partner. A tenants in common mortgage is more complicated, requiring both a deed of trust document to clarify the agreement in place, and individual wills to pass shares after death.

While these legal documents are not difficult to formalise, they should be considered well in advance of applying for a tenants in common joint mortgage. At Clifton Private Finance, we will make your options clear, giving you the confidence to develop a joint mortgage structure that suits your particular needs.

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Joint Mortgage FAQs

Q: What are the disadvantages of a joint mortgage?

A: Your credit reports are linked, which may negatively impact one partner’s credit. You are also fully liable for the other person’s payments and there can be complications if the relationship ends, often requiring a buy out.

Q: Does a joint mortgage have to be 50/50?

A: No. A joint tenants mortgage is a 50/50 split by default, but a tenants in common mortgage allows for unequal shares.

Q: What happens with a joint mortgage if you split up?

A: You can either:

• Sell the property and split the proceeds equally
• Have one partner remain in the property and remortgage to buy out the other
• Both remain on the mortgage and come to a suitable personal agreement

It is advisable that you put a legal agreement in place to avoid future complications and issues.

Q: Who owns the house in a joint mortgage?

A: Ownership is based on how the property is registered with the Land Registry. The terms of the mortgage do not necessarily directly correlate to the property ownership. In most simple joint mortgages, both partners own the house equally.

Q: How much can a couple borrow for a mortgage?

A: The current lender standard is an LTI of 4.5x the total income. To calculate, combine your salaries and multiply by 4.5. With access to specialist lenders, at Clifton Private Finance, we can often secure you a mortgage at 5.0x, 5.5x, or even 6.0x LTI, depending on circumstances.

Q: Whose credit score is used on a joint mortgage?

A: Both credit scores are considered, but the weaker score will hold more weight and may affect the application if it is poor.

Q: Can I sell my half of a joint mortgage?

A: It is possible, but complicated and will usually require the other partner’s agreement and lender approval. In most cases, a remortgage will be needed with new affordability tests and underwriting.

Q: Can one person pay a joint mortgage?

A: Yes. As long as the monthly repayments are made, the lender doesn’t care who is making the payments! Note, however, that making a larger contribution to the mortgage payments does not entitle either party to a greater share of the property, unless otherwise defined in a deed of trust.

Q: Do married couples have to get a joint mortgage?

A: No. A married person can apply alone, although lenders will want to evaluate the full household finances for affordability purposes. If one partner has a very poor credit history, a sole application is not unusual.

Q: Are joint mortgages more expensive?

A: No. Joint mortgage rates are identical to individual single mortgages, and depend on LTV, your income, and credit status.

Obtaining a Joint Mortgage with Clifton Private Finance

Our mortgage team here at Clifton Private Finance is here to help. With decades of experience and access to the whole UK marketplace of mortgage lenders, we can provide access to a joint mortgage product that will suit your individual situation. Whether you’re looking for a standard joint mortgage as a married couple, or a more tailored tenants in common mortgage to get a step up on the property ladder, we have the solutions to fit.

Contact us today to speak to a specialist joint mortgage advisor.

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