First Time Buyer Joint Mortgages

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First Time Buyer Joint Mortgages

Carolyn Dunion talks us through First Time Buyer joint mortgages. 

Who is classed as a First Time Buyer? 

A First Time Buyer is basically anybody who’s never owned a property previously.

How do joint mortgages work for First Time Buyers? 

Joint mortgages for First Time Buyers work the same as all kinds of joint mortgages with two people on the mortgage. In some scenarios you might even have three people on the mortgage. 

Basically, you have two people who are ‘jointly and severally’ liable for that mortgage. What that means is that if somebody didn’t pay the mortgage, the lender would pursue both parties for the whole amount. They usually pursue the person they can get to first. But you are both fully liable for the whole mortgage. 

Is it becoming more common to have more than two people on a mortgage?

Yes, because it can be quite difficult to get a deposit together. Sometimes we’re seeing friends buying as a collective rather than the traditional couple – that is an option for people.

My partner is a First Time Buyer, but I’m not – what are my options?

It depends on the lender. You may not qualify for First Time Buyer products if somebody who’s not a First Time Buyer will be on the mortgage. However, it’s not normally an issue. 

There are relatively few First Time Buyer incentives at the moment. You will get a mortgage, it’s just that being a First Time Buyer is not always that beneficial from a mortgage perspective.

Do I have to pay stamp duty if my partner is a First Time Buyer,  but I’m not?

Purely First Time Buyers at the moment will get rate relief on part of their stamp duty or Land and Buildings Transaction Tax, as it’s called now. Obviously if you’re not a First Time Buyer, you don’t qualify for that.

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Can I get a mortgage with a guarantor?

They’re very rare these days. One or two lenders have some form of a guarantor mortgage. They tend to work on the basis that someone, usually a parent, puts their own savings towards the deposit. They would also be liable if the person didn’t make the mortgage payments. 

The evolution if this is known as a Joint Borrower Sole Proprietor mortgage, where the guarantor, the parent or family member, is still responsible for the mortgage. But they don’t actually sit on the title deeds of the property. They have all of the responsibility and none of the benefit. 

But it allows them to provide that service without incurring additional dwelling tax on the property they are guaranteeing. That’s usually very useful. Guarantors tend to own a property already and would incur that tax if they just became a joint borrower in the standard format.

What else do we need to know about Joint Borrower Sole Proprietor mortgages?

Joint Borrower Sole Proprietor is based heavily on the guarantor’s affordability. If they have their own existing mortgage, their income has to justify that mortgage plus the new mortgage. 

It’s also based on that person’s age. Whilst we can take them to reasonably old age – around 75 to 80 – by definition as a parent they’re usually quite a bit older. The monthly cost to repay the mortgage could therefore be a bit higher, because we can’t take the mortgage over as long a term as we might with somebody younger.

How much can someone borrow on a joint mortgage as a First Time Buyer?

That depends very much on their circumstances. It used to be that people could just get a multiple of their salary, but those days are gone now. Lenders tend to have different criteria for assessing affordability, but they will always be looking for sustainable income. 

They’ll be looking at whether the person has any financial dependents, their age and credit commitments. But it really does make a difference to speak to somebody like myself who understands how lenders assess affordability. 

There can be quite a big difference between one lender and another, particularly if you’ve got income sources that are a bit sporadic, like commission and bonuses. It also certainly varies a lot for self-employed people. So I can’t give a clear answer, but we don’t charge for affordability discussions, so have an initial conversation with us and you’ll get an idea of what you could borrow.

How do you calculate a First Time Buyer joint mortgage?

Affordability is lender specific rather than buyer specific. So the lender will make that calculation regardless of whether you’re a First Time Buyer or not.

Can you transfer a joint mortgage to one person?

Theoretically, you can. It’s called a transfer of equity. There’s a legal process involved in that. However, the lender would have to be comfortable that the person remaining on the mortgage could afford the full amount in their own name. 

They will have to go through a full affordability check. If it all adds up, that’s not a problem. If the lender can’t justify that affordability, they wouldn’t allow that to happen.

How can a mortgage broker help someone get a joint mortgage as a First Time Buyer? 

Getting advice from somebody like a mortgage advisor has never been more important, because the affordability assessments are so varied between each lender. It is massively helpful to have that conversation. 

A mortgage advisor can also help steer you through the whole process. We don’t necessarily answer all the questions, but we can point you in the right direction. Sometimes it’s just useful to have a bit of moral support whilst you’re going through what’s a major life event.

We will build a relationship where you know us and trust us, and feel comfortable to run things past us. That’s certainly at the centre of what we do at McKendry Dunion.

Your home may be repossessed if you do not keep up with your mortgage repayments.