Joint Mortgage With Friend

How does remortgaging a joint mortgage with a friend work?

It’s much like any other remortgage, but you both have to agree. The lender reassesses both incomes and your expenditure.

If one person wants to come off the mortgage, you would have to do a ‘transfer of equity’ and remortgage into one person’s sole name. This would need to fit affordability, based on that sole person’s income.

Also, you’d probably have to raise equity to pay off the person who wants to come off the mortgage.

What is the maximum age for a joint mortgage with a friend?

It depends on the employment status of the friend. If they’re employed or self-employed, typically, the maximum age on a mortgage is 75.

What happens if you have a joint mortgage with a friend and the other person dies?

Ultimately, it depends on the ownership type you agreed to when you purchased the property. You would have to take on the mortgage by yourself, and you would be responsible for paying it in full each month.

Typically, the ownership situation would come down to what’s in the Will – and if there’s no Will, it will be allocated in line with UK intestacy rules.

Is getting a joint mortgage with a friend a good idea? What are the advantages and disadvantages?

It can be a good idea in some situations, but it does come with risks. Ultimately, it depends on your finances, the relationship, and your long-term plans. The main advantage is that it’s easier to afford a home with two, so it helps you both get on the property ladder faster.

You can split the living costs, which also helps. Once you purchase a property, you will build equity up between the two of you – you’ll be paying off the mortgage, and hopefully, the value of the property will increase, as well.

The main disadvantage is that if one person stops paying, you still owe the full mortgage. If you fall out with your friend, buying them out can be complicated. If you miss any payments, it could impact both of your credit scores, and even if one of you moves out, you’re still both liable unless the mortgage is changed.

How do you apply for a joint mortgage with a friend? What’s the process?

The process is very similar. You would seek advice from a lender or mortgage broker, and they would go through a fact-find outlining your income, expenditure, and personal circumstances. You would then do a Decision in Principle, followed by a full mortgage application.

Before speaking to a broker or a lender, it’s sensible to discuss with your friend what your budget would be, what each of you can contribute as a deposit, and what ownership split you’re looking at. You also need to agree on the monthly payment split and what your exit plan would be. This would help avoid any issues later on down the line.

How can a mortgage broker help? Do you have anything to add?

A mortgage broker can be very helpful when getting a joint mortgage with a friend, especially because the setup can be more complex than a standard application.

It’s important to weigh up the pros and cons to make sure you’re both comfortable with what you’re doing.

Key Takeaways:

• While you and your friend apply together, each person is individually responsible for 100% of the mortgage. If one person stops paying their share, the other must cover the entire mortgage payment.
• The debt responsibility is shared 100%, but the property ownership split does not have to be 50-50. You can own the property as tenants in common with unequal splits (e.g., 70-30) that reflect contribution, which should be legally recorded in a Deed of Trust.
• Borrowing is based on your combined income, typically 4.5 to 5 times the total. The minimum deposit you need is as little as 5% between you.
• The main advantage is that it makes it easier to afford a home, helping both parties get on the property ladder faster. The main disadvantage is the risk of having to cover the full mortgage if your friend stops paying, and complications that arise if you fall out and need to buy them out.
• Before applying, you should discuss and agree on a budget, each person’s deposit contribution, the ownership split, the monthly payment split, and a formal exit plan to help avoid later issues.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY-TO-LET MORTGAGES.