This film is part of the series "Joint Mortgages"
How do joint mortgages work?
A property can be owned by up to four people, it could be four, or anything in between, but whoever owns the property has to be on the mortgage, so a joint mortgage will be a mortgage for people who have bought property together. Exactly the same mortgages are available on a joint basis as are available for people who buy property individually, but it's important to understand with a joint mortgage that even though you can agree amongst yourselves what proportion each person owns of the property, as far as the mortgage is concerned even if you have an agreement amongst yourselves to pay a particular percentage of the joint mortgage each (which may not be an equal percentage) if anyone doesn't pay their share, the other people on the joint mortgage are equally liable, and if the joint mortgage is not paid on time then everyone gets a bad payment history.
What are the pros and cons of getting a joint mortgage?
If a couple are buying a property together, whether they are married or not, then they would normally buy that property in their joint names, and therefore they would have a joint mortgage. But if friends are buying a property together, they are probably doing it because they can't afford to buy a property individually and clearly. If it's three friends rather than two, that gives them more buying power. So the main advantage is by pooling your resources you can afford a bigger property and afford a bigger mortgage. The downside is that you have an obligation to each of the friends you are buying the property with, and if anybody actually fails to meet their mortgage commitments, then the other parties involved would be equally responsible. And so let's suppose one person becomes unemployed, or perhaps wants to move away, and doesn't continue to make their share of the mortgage payments, the other people will be responsible for paying the balance, and if they don't, everybody gets a bad payment history. So you need to have a really clear understanding between you when you buy a property together, and consequently take a mortgage together as to what's going to happen if anyone wants to sell their half or their third, whatever it may be, or to move away, perhaps if they want to buy a property with a new partner. So, quite a
lot of considerations and you should always get legal advice. Everybody involved should get separate legal advice and you should lay down quite clearly, in black and white, what will happen in the event that somebody wants to move out. You may subsequently change those terms, but if you have something set out initially, at least you have something to work from.
We're getting a joint mortgage - what happens if, in the future, one of us wants out?
What I'll always recommend to anybody taking out a joint mortgage is that they make sure a proper legal agreement is drafted initially, which specifies what the rights and obligations are of all the parties involved. If one person wants out, you can then refer to that and whilst you may agree to vary the terms amicably, at least the legal agreement will specify the bottom line. Essentially, from a lender's perspective, they will only agree to allow one person to come off the mortgage if the income of the person remaining is sufficient to satisfy their requirements, which will often be a problem. So, if one person wants out, then unless they agree to retain their share of the property as an investment (perhaps with the larger's income paying their share of the mortgage) then it may well be necessary to sell the property, because the person remaining will not be able to afford it on their own. An alternative might be to find an alternative person to buy out the person who wants to move out, but in practice that may be difficult because that person has to be acceptable to the person remaining and has to be prepared to pay the right price to the person moving out.
I want to get out of a joint mortgage. What are my rights?
If you want to leave a mortgage deal, hopefully you have got a legal agreement which specifies exactly what your rights are, and then it's clear in black and white; and even though you may agree with your co-owner to vary the terms of your agreement, at least the bottom line is that you know exactly what you can and what you can't do within your rights. In most cases, situations like this can be dealt with amicably. If they can't, then you will need to see a solicitor who will explain exactly what your options are; but in a worst case scenario it could mean going to court.