A mortgage with family or friends
Taking the first steps on the property ladder can be difficult, especially if you buy by yourself. We hear from many potential buyers who want to buy a property and have a mortgage with friends or a joint mortgage agreement with a family member or relative to get on the property ladder.
Two incomes are better than one, so pooling resources with a loved one for a joint mortgage can make it possible to move into homeownership.
However, you will still need the right mortgage advice to be introduced to mortgage lenders to get the best rates for a guarantor mortgage. That’s where we come in as a mortgage broker, we have a few mortgage providers lending joint mortgages.
We’ll help you find a mortgage lender specialising in family and friends’ mortgages.
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Buy a property together with family members or friends
A joint mortgage can be obtained with family members, friends, siblings and other non-parental relatives. The general rules for joint mortgages are applicable, regardless of whether it’s with your best friend, son, daughter, brother, sister, or another non-parental family member.
However, buying with your parents or assistance is sometimes slightly different due to their income and age. Continue reading for more information.
A joint mortgage with parents
Parent/child Joint mortgages are very common. However, if you want to purchase with your parents as tenants in common or joint tenants, affordability and age will be key considerations.
Different types of tenancy
You can buy a property together with a tenant in the common mortgage or with a joint tenancy agreement.
Couples tend to prefer joint tenancies. A joint tenancy gives you an equal share of the property. If one of your joint tenants dies, the property automatically passes to the other. You might have to pay inheritance taxes even if you are not married to your co-owner.
You don’t need to be tenants in common to have equal shares of the property. If you die, you can also decide what to do.
Experts recommend that you have a Deed Of Trust prepared by a solicitor if you get a joint mortgage with your friends. This will outline who is who between you.
Is it possible to get a joint mortgage for my parents and a senior parent?
Yes, it can be more difficult if your parent is still working full-time.
Your parents might have enough income to pay the mortgage right now, but you could run into problems as they get closer to retirement, they may struggle with the mortgage payments.
Mortgage lenders may have an age limit for borrowers. The mortgage cannot be extended beyond this age. This is a problem when applying for a joint mortgage with one parent. A lender with a 75-year age limit would deny a 50-year-old mum or dad a mortgage term that exceeds 25 years. The mortgage must mature before the applicant turns 75.
Lenders have different age limits. Lenders have relaxed their rules recently, allowing borrowers to get a mortgage for up to 85 years. Some lenders are smaller, such as several building societies, and do not have strict upper age limits.
Participation
If you get a mortgage together, both of you will share the responsibility for repaying the debt. Lenders want to ensure everyone who takes out a mortgage can repay it. As such, they will need to verify that all applicants can manage the monthly repayments. Both your financial history and the finances of any friend who is splitting a mortgage will be considered.
A mortgage lender may not accept you if one of you has a poor credit history.
You should also remember that if you have a joint mortgage with someone you know, the responsibility for missing mortgage repayments falls on you.
Joint applicant sole owner
A joint owner sole proprietor mortgage is one way to ensure you own the property in its entirety. These mortgages allow your parents to be joint mortgage holders but not own the property.
Only a small number of lenders currently offer this option. Once again, your parents’ age will be considered. This option has one benefit: your parents will not be subject to the 3% stamp tax surcharge on second homeowners.
Is a family mortgage more affordable?
The more, the better. Some lenders will not consider two incomes. Some will accept four or more. Talking to one of our mortgage brokers will help you get the best mortgage advice. They have the extensive market knowledge and will work hard to get you the best deal.
What else should I know about buying with family or friends?
Apart from the affordability criteria, you will also need to meet the requirements for anyone applying for a mortgage. This includes sharing with a partner or best friend, as well as the requirements of a parent. You will need to raise a deposit and pay Stamp Duty, depending on the property’s price.
Our complete guide provides more information about eligibility requirements for mortgages.
It is also important to ensure you are happy sharing your home with friends and family.
A joint mortgage can be obtained with friends
The process is the same as obtaining a mortgage with a sibling or partner. Continue reading to learn more about the impact of the interest rate and how many friends you are allowed to buy.
What number of friends can I purchase with?
While some lenders may only allow two borrowers, others may allow for a three-person mortgage. Other mortgage lenders may allow up to four. Lenders will only allow two borrowers to apply for a mortgage to make matters more complicated.
What if I have to pay more?
No. The mortgage may be less expensive if you pool your resources with friends or family members to make a larger deposit. Despite this, very few lenders will accept four applicants with four incomes.
Ask your family to help you with your mortgage deposit
A deposit could be made by your parents or any other family member. To appease the lender, your parents or relatives should give you a deposit.
A family offset mortgage is a loan that your parents will pay to cover the deposit if they are unable or unwilling to do so. Multiple lenders can offer these mortgages, although they may have different names, so you might not immediately know what they are.
These products are sometimes called family springboard mortgages and family deposit mortgages. They allow customers to improve their eligibility by involving their families. The borrower deposits 5%, and the supporter puts 10% of the property’s worth into a savings account that the lender holds. This allows the mortgage to be offset against the property’s actual value. Learn more about family deposit mortgages.
Guarantor mortgages
A guarantor mortgage is another option to help you obtain a mortgage with family support.
A guarantor mortgage is a mortgage guarantee that a parent or a family member provides. If you miss a payment, your guarantor will cover the cost.
The lender will consider the guarantor’s income, savings, and debt just like any other applicant. However, the guarantor won’t be named on the property documents (as it would be if you took out joint mortgages with your parents). Guarantor mortgages can be a great option for borrowers with low incomes who cannot borrow the amount required by a lender.
After Help To Buy was launched, many lenders stopped offering guarantor mortgages. Lenders that offer this service will often require the guarantor or their property to be secured against the loan.
Are guarantor mortgages subject to higher rates?
Yes, family guarantor mortgages may have higher rates than standard mortgages. After a conversation with one of our advisors, you can calculate the interest rate of a joint mortgage with your parents.
Is it possible to get a mortgage when there are three applicants?
Yes! Some lenders will not allow more than two people to apply for a mortgage. Others are more flexible and would accept three or four.
However, not all mortgage providers are comfortable with more than one applicant. They might not be willing to accept all four or five applicants. Even though three to four people may be listed on the mortgage, the total amount you can borrow could still be determined based on the combined salaries of two applicants.
Talk to expert mortgage lenders about joint mortgages
It is possible to share the cost of buying a home with family members or friends. However, it is always advisable to seek professional mortgage advice before you make any decisions.
We have mortgage brokers that specialise in helping customers who buy a mortgage with friends or family. They can help you save time and money by introducing you to the right lender.
Send us an enquiry, and we’ll help you find the right advisor for your situation and needs. Our broker-matching service comes with no obligation.
Joint mortgages FAQ
What is the maximum amount I can borrow when I have a joint mortgage with my family member?
Like any mortgage, a lender will decide how much you can borrow when applying for a joint mortgage with friends based on affordability.
This will depend on the income that the lender is considering. Lenders will also consider your outgoings, such as how much money you spend on monthly bills.
- Lenders will accept 4.5x of the total income.
- Lenders will sometimes consider five times the combined income. The borrowers could be eligible to borrow £400,000 in the above scenario.
- A few lenders will lend up to 6x your income under certain circumstances
- There are second-charge mortgage lenders that will lend up to 10x the income of those who already own property.
It is worth noting that lenders have a more complicated approach to affordability. Although income multiples are important, lenders use an affordability model that considers your monthly spending, outgoings, and any potential changes in the future that may impact your ability to repay.
Can I purchase it with my family and still own the property?
Yes, you can. You can do this in many ways, all of which have been covered in this article.
Check out the sections below.
- Mortgages Joint owner sole-proprietor mortgages
- Guarantor mortgages
- Help with mortgage deposits
Can I assume a mortgage that a relative is holding?
Although it is possible to transfer a mortgage among family members, there are many things to consider.
Suppose you are looking to assume the mortgage on your family home. First, you would need to meet the affordability requirements of the lender.
Second, your lender might no longer offer the fixed-rate mortgage deal. You may not be permitted to keep this deal.
You should also remember that inheritance tax will be due if your parents decide to “give” you their mortgage-free home and die within seven years.
Contact us today for further information.