Written by: Danny Belton - Head of Lending
By combining incomes and deposits, you can potentially access a better property than you could afford alone. However, sharing a mortgage with friends comes with its own set of considerations.
What is a joint mortgage?
A joint mortgage is, in essence, a loan obtained for the purpose of buying a property by two or more persons. They become co-owners (or tenants in common) of the property and share responsibility for debt repayment. Combining salaries and borrowing power can help people qualify for a larger loan and a more attractive house, which can be advantageous.
Financial considerations
Credit checks
All applicants will undergo credit checks. A poor credit score from one person could affect the entire application.
Deposit and ownership shares
Decide upfront on the contribution percentages for both the deposit and ongoing mortgage payments. This will determine your ownership stake in the property.
If you’d like to learn more about ownership shares in joint mortgages, give our article on the topic a read!
Legal Considerations
Co-ownership agreement: Draw up a legally binding agreement outlining ownership rights, responsibilities for maintenance and bills, and exit strategies should someone want to sell their share.
Dispute resolution: Include a clear process for resolving disagreements about the property or finances.
Draw up a will: Get a will drawn up, ensuring your share of the property goes to your chosen beneficiary when you pass away.
Lifestyle considerations
Compatibility: Living with friends can be great, but ensure your lifestyles align. Discuss expectations for guests, noise levels, and cleanliness.
Future plans: What if someone wants to move out or start a family? Plan how you'll handle changes in circumstances.
Getting expert advice
Sharing a mortgage with friends can be a complex process. A qualified mortgage adviser can guide you through the financial aspects, including:
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Assessing your combined income and outgoings to ensure you can comfortably afford the mortgage.
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With access to a wider range of lenders, they can find a product that suits your circumstances and offers a competitive interest rate.
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By seeking professional advice, you can increase your chances of a smooth and successful experience when buying a property with friends.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.