Property inflation has outstripped wage increases over the years. In order for a first time buyer to be able to afford a suitable property, many people need to buy with someone else. This is because there are then two incomes for Lenders to take account of when calculating your maximum mortgage amount.
You then have someone to share the costs with. There are risks to consider though and here we answer a few questions that occur from time to time.
Some Lenders allow up to to four people jointly co-own a property. In the event of one borrower stopping their contributions to mortgage payments, any joint owners have a legal right to stay in their home unless a court rules otherwise. Therefore you need to be very selective about who you buy with.
If you want to increase the mortgage at a later date all borrowers need to consent. It’s important therefore that you make long term plans about what might happen down the line should you end up wanting different things.
Most married couples or those in civil partnerships opt for Joint tenancy. If either applicant were to die then the property passes to the other owner. If you have take out mortgage life insurance the mortgage would be repaid at that point also.
You will need the consent of the other applicant if you want to sell or remortgage the property in the future.
Tenants in common is sometimes chosen by relatives or friends that buy together. You will still jointly own the property but you are not forced to do so in equal shares. This works well if one party is making a bigger financial input than the other.
You can act individually if you are a tenant in common. For example, you can sell or give away your share of the property to someone else.
All mortgage borrowers are jointly and severally liable for mortgage payments. If one of the parties stops paying then the other/others will have to make up the shortfall to prevent the mortgage from falling into arrears. Arrears on a mortgage may stop you getting another mortgage in the future.
Think of it like this: you don’t own 50% of a property, you own 100% of it jointly.
Removing someone from a mortgage can be very difficult. Lenders will need to be confident that you can afford the mortgage payments on your own before they will permit this.
No one who buys a home with a partner does so with the intention of things not working out. A mortgage is a massive financial commitment though and making changes to it at a later date is not always easy.
Even if you can demonstrate that you have been able to maintain mortgage payments since your ex moved out does not guarantee that a Lender will agree to your request to put the mortgage into your sole name. Lenders like the idea that there are two people to pursue in the event of arrears occurring. To remove someone they will carry out a brand new affordability assessment, exactly in the same way as they would at the point of purchase.
If the Lender declines the request you should contact a mortgage advisor to see if there are other Lenders who would agree to your request to transfer the mortgage into your own name.
It can be worth talking to family members to see if they can help you out. They can do so by replacing your ex on your mortgage or by gifting you a lump sum to reduce the amount owed.
If you and your partner split up and you leave the family home then you remain responsible for mortgage payments with them. This is the case even if you agree with your ex that they will make all the payments.
If you are sending your partner money each month you should keep an eye on your own credit report to ensure they are paying the mortgage. If they default then it will impact your own score.
If you are still connected to an old mortgage then the payments for that will be taken into account if you subsequently want to buy a new home of your own. That will mean Lenders might not lend you as much as you would like.
Buying a home with anyone is a risk so you need to go into it with your eyes open and look into first time buyer mortgage advice. It’s always better to agree what would happen to the house should things not work whilst you are all still getting along well!