Multi Person Mortgage
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Multi Person Mortgage
Carolyn Dunion talks to us about a multi-person mortgage.
What is a multi-applicant or multi-person mortgage?
Basically, it means that more than one person is applying for the mortgage. It’s useful, because we can take into account the income of all parties. Then, those people are responsible for the mortgage.
How many people can be named on a mortgage and how does this differ from a joint mortgage?
We would tend to refer to it as a joint mortgage where a couple is buying together. However, you can usually have up to three people named on a mortgage. It depends on the lender.
It’s more typical to see more than two people named on a mortgage with a Buy to Let property. There may be a reason why three people want to invest in a property, perhaps to make it a bit more manageable.
We generally assume a joint mortgage is for two people and a multi-person mortgage is where you might have up to three people.
Who can get a multiple applicants mortgage? Who is eligible for a multi-person mortgage?
The two terms – multiple applicant and multi-person – are interchangeable. We might refer to it as multi-applicant, multi-person or joint, but all refer to the same thing.
Anyone who meets the general criteria of the lender can apply for a multiple applicant mortgage. So really, anybody who’s eligible for a mortgage could get a multi-person or joint mortgage.
There are some advantages of applying with two people, in that you’ve got two sets of income for consideration. Generally speaking, you would expect someone to get more borrowing if there are two incomes to use.
Obviously, the reverse of that is true if one person has poor credit. If that is causing them a problem in applying for a mortgage, it might pull down the application compared with somebody applying on their own with good credit – they might be more successful.
How do multi-applicant mortgages differ from standard mortgages?
Really, they don’t differ. They’re much the same. Just note that with more than one person, every party that’s applying will be assessed by the mortgage lender.
What types of properties can you get a multi-person mortgage on?
Any property that’s deemed suitable for a mortgage for a sole applicant will also be suitable for a multi-person or a joint mortgage. The types of properties that you can buy do not change in this scenario.
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How is ownership split?
This is actually a very pertinent question. The people named on the mortgage and on the property title have to match.
If it was a joint mortgage, for example, the property and the mortgage would usually be owned 50-50. However, joint mortgages are ‘joint and separately liable,’ which means that each applicant or mortgage holder is responsible for paying the mortgage.
You might, as a couple, agree that you will split the payment 50-50. But if one person doesn’t pay their 50%, the lender can pursue either party for all of the outstanding mortgage payment. You wouldn’t be able to say that you’ve paid your half. If they can get money out of you, instead of your partner, they will do that.
How much can you borrow for a multi-applicants mortgage?
If we’ve got two sets of income, that certainly will allow people to borrow more. But as with a sole application, the borrowing will depend on the applicants’ ages and how many financial dependents and credit commitments they have. Do bear in mind that car finance is a credit commitment.
Generally with a joint mortgage, people can borrow more because there are two incomes. Plus, because two can sometimes live as cheaply as one, when splitting council tax costs and utility costs and so on, you do tend to find adding somebody onto mortgage might raise the amount of affordability by more than you expect.
What are the benefits of a multi-applicant mortgage? Are there any risks?
The benefit, of course, is that you have somebody helping you to maintain the mortgage, and presumably splitting bills too.
Sometimes people forget to take into consideration that you are buying an asset jointly, and you’re also taking on the liability of a mortgage jointly. There are legal implications to that.
For a couple, if that relationship breaks down it can be problematic. You have to be in agreement as to how you want to separate the property and the mortgage. That can cause some difficulty.
We also see people buying properties with friends, often in their twenties, looking to get on the property ladder. There’s no intention that they’re going to live in that property forever, together. But it’s a way to save paying rent. It’s always a very good idea to have considered the exit plan.
Even if you’re buying with a romantic partner and you’re hoping to be together forever, it’s worth having a conversation to agree a plan in the unlikely event that the relationship breaks down. If people are contributing different deposit amounts, how will you view that in the future?
It’s useful to talk about what would happen if something goes wrong before you jump into that commitment.
Are there any alternatives to a multi applicant mortgage?
We do have the situation where people are in a partnership and only one person is named on the mortgage. Obviously it depends on their circumstances as to whether that’s the right thing to do.
As we’ve mentioned on the podcast before, we also have a Joint Borrower Sole Proprietor mortgage. That is the one exception where the mortgage doesn’t mirror the property title. In that scenario, you could have one owner, but two people responsible for the mortgage.
The person who’s not on the title has all of the risk of the mortgage and none of the benefit of the asset. It’s a modern day alternative to a guarantor mortgage, if you like. For some people it works really well, and in some situations it’s beneficial tax-wise, but you do need to take advice on what suits your individual circumstances.
You’ve demonstrated how a mortgage broker can help here, but is there anything else you’d like to add?
As always, advisors are very helpful in this process. It’s useful to have someone assess your situation to see if this is the right option for what you’re trying to achieve.
It also means you have somebody to just guide you through – including looking at some of the negatives so that you’re making a really informed decision. If things go wrong, it’s very difficult to get out of owning a home and the liability for a mortgage.
If this is not the right solution for you, an advisor can really help spell that out to you before you make that commitment. We can be invaluable in helping navigate the options for your situation.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
