Mortgages For 3 Or More

What is the difference between a normal mortgage, and a mortgage for three or more people?

There is no difference! Multi-person mortgages are exactly the same as a mortgage for one, or two people. The only differences are whether a lender will be willing to approve a multi-person mortgage, as not all lenders will. 

Even if the lender will allow three or more people to be named on the deeds, they may not take all applicants’ incomes into account when reviewing affordability. 

As with any mortgage, everyone named on the mortgage is responsible for paying back the loan. There are special mortgage products available if not all of the applicants wish to be named on the deed, or to reside in the property.

What are the advantages of a multi-person mortgage?

The more people who can put towards a deposit, generally means that you will have a larger deposit. This means that you may be more likely to be approved.

Access to better interest rates. With a larger deposit, your loan-to-value ratio will be more favourable, which means you could access the most generous deals available.

You may be able to afford higher value property. Whether this means a larger property, in a more popular area, or renovated to a higher standard - with a larger deposit you have access to more of the housing market.

What are the disadvantages of a multi-person mortgage?

Some lenders will stipulate that the applicants all must live in the property, or that there needs to be a family connection between the applicants. This can restrict the mortgages available to you.

Some lenders won’t consider the income of all participants, which can limit the amount you’re able to borrow, even if all applicants have high salaries in stable jobs. 

If the relationship turns sour, it’s not an easy or quick process to separate. 

If one of you stops making their share of the repayments, the other(s) will need to make up the difference. Any late or missed payments will be recorded on the credit files of all the borrowers.

The other borrowers will be named on your credit file, and if they were to build up a negative credit history in future, this will be associated with your own credit report.

Are there different types of multi-person mortgage?

Depending on your personal circumstances, you may wish to consider a JBSP (joint borrower, sole proprietor) mortgage. This means that if you apply with friends or family, they can be included in putting down the deposit and/or the affordability assessment, but they have no stake in the property itself. This can make it less complicated longer term if decisions need to be made regarding renovation or selling. 

This has the added bonus of avoiding stamp duty, if the co-borrower who isn’t named on the deeds already owns property.

You may also want to consider family mortgages, where family members can act as guarantors, or pay towards a deposit, but the mortgage itself is not in their name. 

Assuming that all applicants wish to live in the property, there are two types of mortgage:

Joint Tenants

Joint tenants all equally have ownership of the property. This is most common with married and long-term couples. You both (or all three of you) own 100% of the property. When you sell, the proceeds are divided equally, irrespective of whether one of you paid less into the repayments, or paid less into the deposit. 

Tenants in Common

Tenants in common each own a specified share of the property which is defined in a Deed of Trust. This is more common with business partners or friends buying together. When you sell, you’ll each take the pre-defined proportion of the proceeds. At any time, one of you is free to sell their share of the property. 

What is the maximum number of people who can buy together?

Many lenders will only approve applications with up to three people, some will consider four. At the time of writing, there are currently no lenders who will consider five people or more on a joint mortgage.

What happens if one of us wants to leave the joint mortgage?

When one or more of you want to move out, or dissolve their investment, the person leaving the mortgage is legally entitled to their share in the property. You have a number of options.

• You could sell the property: if you all wish to move out, you can sell the property and pay back the mortgage to the lender. However, paying it off early will usually incur an Early Payment Recharge (ERC), which can be in the thousands.

• You could transfer equity: if only one of the borrowers wishes to move out, the others may choose to “buy out” the person moving out. This is a legal process that transfers the ownership of the property from the person leaving to the person(s) retaining ownership.

• Take no action: the person moving out may be happy to keep contributing to mortgage payments, even if they move out. They would retain their share of the property and be entitled to any profit when the property is eventually sold. If this is what you should decide to do, you should have a conversation up front about how you will split repair costs in the meantime. 

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