Over the years, we have seen property prices increased at a far faster rate than wages have. Through speaking to many customers, we have found a common occurrence, in that many people look to purchase in joint names with a partner or friend, as a means of being able to afford a suitable home at a more reasonable price.
Purchasing in joint names will usually increase the maximum capacity of what you are able to borrow, as the lender will look at all parties income, rather than just one, taking this into account when running calculations on affordability.
We have known and we do work with some lenders who will accept up to four people as co-owners of a property. If throughout the duration one of the co-owners of the property decides that they would much rather not contribute to the mortgage repayments, any of the other joint owners will still have the legal right to reside in the property, unless this is ruled otherwise by a court.
If you would like to increase the mortgage amount later down the line, you must gain full consent from all your fellow co-owners. It’s therefore essential that you make long term plans with each other, discussing what you’d like out of this, so you can stay on the same page and avoid future disputes if you end up wanting something different.
Commonly, for married couples or those still in civil partnerships, a ‘Joint Tenancy’ is something we have seen customers choose quite often. With this type of tenure, if for some unfortunate reason one of the party were to pass away, the property would be handed over to the other owner of the property. If you have taken out relevant life insurance, at this point, your mortgage would be covered and repaid.
With ‘Joint Tenancy’, you would still need all owners of the property to agree if you decided you wanted to Remortgage later down the line.
If choosing to purchase with relatives or friends, we find that ‘Tenants In common’ is the most popular route that customers take. You will still remain as a co-owner of the property, along with your cohorts, but you also have the flexibility to do this without the need to have completely equal shares. This works well if one party is making a more significant financial contribution than the other, as you could split the shares, for example if there were 3 of you, 60%, 30%, 10%.
With ‘Tenants in Common’, another positive aspect for the co-owners is that you have the freedom to act independently. An example of this, is that you can then choose to sell or give away your share of the property to someone else, without the need to consult with your fellow co-owners
All mortgage borrowers are jointly and severally (responsible for their own decisions) liable for mortgage payments. IF at any point in the future you find yourself paying all of your mortgage payments without a co-owner, you will still be liable to prevent the mortgage from falling into arrears.
This is because mortgage arrears showing on your credit file could have the potential to stop you from obtaining a mortgage at any point in the future. The best way to think of it is like this: You don’t own 50% of a property, you own 100% jointly.
When purchasing a home with a partner, it’s a whole new chapter starting in your life and can be a great way to start fresh with another individual. In all the excitement of moving home, it can make you wonder about what will happen if things go a little wrong.
The primary thing to remember is that lenders will always need to have the utmost confidence that you can keep up with monthly payments on your own before they will approve you removing a partner and taking on the mortgage alone. As seen from above, a mortgage is a big financial commitment and making changes is going to be a challenge.
If you are able to prove that you can maintain mortgage payments following on from your partner leaving, the lender may agree to your request to put the mortgage into your single name. However, 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, just like they would’ve done originally at the point of purchase.
Whilst a lender may not always accept a request, it’s always beneficial to speak with a mortgage advisor in Leeds prior to taking this route, as there may be other lenders who could agree to your transfer request.
It can also be worth talking to family members to see if they can help you out to make your financial and personal life a little easier. They can do so by replacing your ex-partner on your mortgage or by gifting you a lump sum, in a bid to reduce the amount owed. This will hopefully mean that your savings are able to contribute to easing your future mortgage payments.
If you and your partner split up and you leave the family home, then your responsibility is still shared for mortgage payments. Even if you agree that you will send your partner the money to cover the costs, in the event of potential arrears, you will still be chased for payments.
If you are sending your partner money each month, you should also keep an eye on your credit report to ensure they are still actually paying the mortgage. If they default, then it will impact your own score due to the financial tether you have.
If your name is still linked with an existing mortgage, then the payments for that will be considered down the line if you buy a new home of your own. This means that lenders might not lend you as much as you would like.
Buying a home with someone is different than just renting with them. It’s always better to agree on what would happen to the house should things not plan out as expected.
For any First-Time Buyers in Leeds or those Moving Home in Leeds that are looking to purchase in Joint Names, you will absolutely benefit from speaking to a mortgage advisor. Even if you are looking to remove a name from a mortgage by looking into a Remortgage in Leeds in your sole name, a member of our mortgage advice team will be able to look into this with you. Please feel free to Get in Touch with our friendly Mortgage Team, we will be more than happy to answer all of your questions.