Joint mortgages: what to know before you sign

A joint mortgage makes every borrower liable for the whole debt, not a share of it. If one person stops paying, the lender can pursue the other for the full amount. Ownership is a separate question from the mortgage: you can hold the property as joint tenants, where the whole passes automatically to the survivor, or as tenants in common, where each of you owns a defined share you can leave to whoever you choose. Decide both points before you exchange, not afterwards.

This is the single most important thing to understand and the one most often skimmed over.

On a joint mortgage you are jointly and severally liable. That means the lender is not interested in your private agreement that one of you pays 60 percent. If payments stop, the lender can chase either of you for the entire outstanding balance. Missed payments appear on both credit files. A repossession affects both of you.

It also creates a financial association on your credit file. Once you are linked to someone, lenders assessing you in future can see and consider their credit record too. That association does not disappear when the relationship does. You have to apply to the credit reference agencies for a notice of disassociation once the financial link has genuinely ended.

Joint tenants versus tenants in common

These describe how you own the property, and your conveyancer will ask which you want.

Joint tenants means you own the whole property together, with no distinct shares. If one of you dies, the property passes automatically to the survivor by right of survivorship, regardless of what a will says. Neither of you can leave your interest to someone else. This suits many married couples and long-term partners who intend everything to pass to each other.

Tenants in common means each of you owns a specified share, which might be equal or might be 70 and 30. On death, your share passes under your will, or under the intestacy rules if you do not have one. This suits unequal deposits, second relationships where you have children from a previous one, friends buying together, and family arrangements.

• Choose joint tenants for simplicity and automatic survivorship.
• Choose tenants in common where shares are unequal, where you want to leave your share to someone specific, or where the parties are not a couple.
• You can convert from joint tenants to tenants in common later by severing the joint tenancy, which is a straightforward legal step.

If you own as tenants in common, write a will. Without one, your share is distributed under the intestacy rules, and an unmarried partner has no automatic entitlement under those rules.

If one of you is putting in a much larger deposit, a declaration of trust, sometimes called a deed of trust, is the document that protects it. It is prepared by a solicitor and records what happens on a sale.

A worked example. You buy at 350,000 pounds. Anna contributes 60,000 pounds of deposit, Ben contributes 10,000 pounds, and you take a 280,000 pound joint mortgage paid equally.

Without a declaration of trust, and holding as joint tenants, the default assumption is a 50 50 split of the proceeds. If you sell three years later for 380,000 pounds and the balance is 260,000 pounds, the 120,000 pounds of equity is split 60,000 pounds each. Anna has effectively given Ben 25,000 pounds.

With a declaration of trust, you can agree that each deposit is returned first and the remaining equity is split equally. Anna gets her 60,000 pounds back, Ben gets his 10,000 pounds, and the remaining 50,000 pounds is split 25,000 pounds each. Anna receives 85,000 pounds and Ben 35,000 pounds.

You can also record other things in it: who pays what proportion of the mortgage, how home improvement spending is credited, what notice period applies if one of you wants to sell, and whether one party has a right to buy the other out first.

If you are married or in a civil partnership, the courts have wide powers to redistribute property on divorce or dissolution, and a declaration of trust is one factor rather than the final word.

If you are unmarried, there is no such regime. There is no such thing as a common law spouse in England and Wales, however long you have lived together. Your rights are determined by property law, which means by whose name is on the title and what documents you signed. This is precisely why unmarried couples benefit most from getting the ownership structure right at the outset.

Note also that Scotland has a separate legal system with different terminology and rules, so take Scottish advice if you are buying there.

Two incomes usually increase what you can borrow, but not by simply doubling it.

Lenders combine both incomes, then deduct committed outgoings for both of you: credit cards, loans, car finance, childcare, maintenance payments and student loan deductions where relevant. They then stress test the payment against a higher notional rate to check you could still afford it if rates rose.

Two practical points. First, the weaker credit file usually dictates the lender. If one applicant has a recent default, the case has to go to a lender that accepts it, even though the other applicant is spotless. Second, existing debt on either side reduces borrowing capacity for both, so clearing a car finance agreement before applying can be worth more than it looks.

Most lenders allow up to two applicants as standard. Some will consider three or four, though usually only two incomes are used in the calculation.

This is called a transfer of equity. It is not a matter of telling the lender that one of you has moved out.

The process runs roughly like this. The remaining borrower applies to the lender to take on the mortgage alone. The lender reassesses affordability on that single income, and this is where most cases fail, because a mortgage taken on two incomes frequently is not affordable on one. If the lender agrees, a solicitor handles the transfer of the legal title, and any payment to the departing party for their share of the equity is dealt with at the same time. Stamp duty can apply if the person taking over is treated as receiving consideration above the threshold, which usually means taking on more than a certain amount of debt.

Realistic timing is four to twelve weeks. If the current lender says no, the alternative is to remortgage the whole thing with a different lender, or to sell.

Until the transfer completes, the person who moved out remains fully liable. Moving out changes nothing about the mortgage.

A joint borrower sole proprietor mortgage, usually shortened to JBSP, lets someone support your application with their income without being an owner of the property. It is most often used by parents helping a child buy.

The supporting borrower is named on the mortgage and is fully liable for the payments, but is not on the title deeds. That means they have no ownership share.

The main attraction is stamp duty. Because the supporter does not own a share of the property, the higher rates that apply to additional property purchases are generally not triggered for them in the way they would be on a standard joint purchase. Tax rules change, so confirm the current position before relying on this.

The risks are real for the supporter. They are liable for the whole debt, the mortgage appears on their credit file and affects their own future borrowing, and they have no ownership stake to show for it. Lenders also apply their own rules, commonly around maximum age at the end of the term, which limits how long a parent can support.

• Agree in writing how long the arrangement will last and when the supporter comes off.
• Check the lender allows a later removal without a full remortgage.
• Both parties should consider life cover, because the debt does not disappear if one of you dies.

Protection matters more on a joint mortgage than a sole one, because the survivor inherits the whole liability. Consider life cover at least equal to the mortgage, and think about critical illness and income protection.

Make wills, particularly if you own as tenants in common or are unmarried. Agree the ownership structure and any declaration of trust with your conveyancer before exchange, because changing it afterwards is more expensive and occasionally impossible if one party has changed their mind.

If you want advice on how a joint application will be assessed, the MortgageMatch directory lets you find FCA-authorised brokers who handle joint and JBSP cases.