Almas Uddin
Founder and Mortgage Advisor
09 Feb 2024
Applying for a Mortgage Together - The Difference Between Joint Tenants and Tenants in Common
When buying a property with somebody else, it's essential to understand your rights, obligations, and what happens if you part ways.
Here we'll explain the different types of joint mortgage and what they mean for your property ownership.
If you require independent advice about your mortgage application, contact the Revolution Brokers team on 0330 304 3040 or via email at [email protected].
Should I Get a Joint Tenant or Tenants in Common Mortgage?
There is a distinct difference between these two types of joint mortgage.
- Joint tenants own the property equally and are both liable for keeping up with the mortgage repayments.
- Tenants in common are separate owners with defined shares in the property, although they remain liable for all mortgage debt.
Most couples opt for a joint tenancy. That means that their share in the property automatically transfers to their surviving partner if one partner dies.
Tenants in common works differently. You can split the stakes in the property any way you wish, and each person could invest a different value. Most tenants in common mortgages are co-purchases between friends.
The right mortgage for you depends very much on your circumstances. Tenants in common are more complicated but then have advantages if you want to control your stake in the property autonomously.
How Does the Mortgage Application Work for Tenants in Common?
Each applicant is liable for all of the mortgage cost, although the lender assesses all applicants' income together.
Up to four people can be registered as a legal owner, in most cases, and you can create legal documents stipulating who owns what proportion of the property.
Most lenders will offer a mortgage based on a maximum of 4.5 times your combined annual income - although you can borrow five or even six times annual earnings in the right circumstances.
What are the Eligibility Criteria for Joint Tenants or Tenants in Common Loans?
Lenders will work on several factors to decide whether they can offer to lend:
- Many will include the two highest incomes, even if up to four people apply for the mortgage.
- Affordability assessments include an analysis of income, spending, debts and credit scoring.
- If one applicant has bad credit or is self-employed, it is vital to consult a broker to ensure you apply to a lender who will consider your application.
- Most mortgage lenders require at least a 10% deposit, although you can apply with a 5% deposit if you have a broker to negotiate on your behalf.
- Some providers have upper limits on the age of applicants to bear in mind.
- If the property is considered non-standard - for example, it is an ex-local authority home or a timber-framed construction, you will usually need a higher deposit.
Do I Need a Declaration of Trust for a Joint Tenancy Mortgage?
Declarations of Trust are official documents stating who owns what percentage of the property and what happens if one owner wants to sell their share.
It can also cover factors such as who pays what, who covers the Stamp Duty, how the profits are shared out if the property is sold, and who contributes to the deposit.
Can I Get a Joint Tenants Mortgage as a First-Time Buyer?
Yes, you can apply for a joint mortgage as a first time buyer. If all the applicants are first-time buyers, you will qualify for Stamp Duty exemptions.
If the property is a second home, there will be a 3% additional Stamp Duty levy to pay.
Can I Switch a Joint Mortgage from Joint Tenants to Tenants in Common?
Potentially, if all parties agree, you can sever a joint tenancy mortgage and switch it by updating the trust deed to being tenants in common.
Remember that if one owner passes away; if you are joint tenants, you automatically inherit their share. If you are tenants in common, the estate will distribute their property ownership stake according to their will.
Can You Remortgage a Property Under a Tenants in Common Agreement?
Possibly, yes. If you have a joint mortgage and the other owner dies, you might be able to remortgage to buy out the shares.
Professional Advice about UK Joint Mortgages
There are lots of considerations when taking out a joint mortgage. It is vital to consider the costs and potential ramifications before deciding what sort of joint tenancy is right for your circumstances.
For expert guidance from the independent team at mortgage advisors, give us a call on 0330 304 3040, or drop a message to [email protected].
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