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Can four people get a mortgage?
Several lenders will accept mortgage applications for up to four people, taking into account their combined income to the calculation. A number of other lenders will allow multiple applicants to be named on the title deed but will only take into account two of their salaries.
Are four-person mortgages a good idea?
Pooling resources
If you are buying a house with three other people, you may find that you have a larger deposit to contribute in comparison to buying a home alone. By increasing your deposit size, you reduce the Loan to Value (LTV) ratio allowing you access to better rates.
Increased affordability
By combining multiple incomes into the mortgage application, your affordability will improve meaning you have increased borrowing power as a group. By splitting the mortgage repayments four ways, your mortgage repayments are lower than if you were buying alone.
A minority of lenders will take into account all four incomes to the affordability assessment, others will accept three, and some will only take the two highest earners from the group.
Joint Borrower Sole Proprietor mortgages
Joint borrower sole proprietor (JBSP) mortgages are increasing in popularity as salaries within the first time buyer market have failed to keep up with property prices.
An applicant on a low income may find that properties in their area are simply out of reach. JBSP mortgages are designed to bridge the gap by introducing another party to the mortgage. They are someone who contributes towards the mortgage repayments but doesn't appear on the title deeds or live in the property. Typically this is an option for a parent or relative to help their children to buy their first home. By not appearing on the deeds, the supporter avoids paying a second home premium on stamp duty. By not appearing as an owner, however, they will not benefit from any proceeds from rental or sale of the property.
Once the applicant has sufficient income to afford the repayments alone, the supporter can be removed from the mortgage. Note that this is a mutual agreement, and if the relationship breaks down, the supporter may find they cannot exit the mortgage.
Relationships in a four-person mortgage
Some mortgage lenders may require the applicants in multiple mortgages to be from the same family; others may be satisfied with the applicants being friends. Some lenders require all applicants to live at the property as their main residence.
Affordability on a four-person mortgage
Unfortunately, there is no set calculation for affordability in a group mortgage, as each lender will have its own criteria.
By working with an experienced broker who understands your needs, you will be able to find a deal that is right for you and your situation. You may find that even if a lender takes the income of all applicants into account, the cap on lending is reduced in comparison to a single person mortgage. It may actually be beneficial to take the salary of the two highest earners to a lender that offers a higher cap on lending.
Sharing ownership in a group mortgage
Joint Tenants
Under a joint tenant arrangement, all borrowers are legally seen as a single owner and have equal rights in the property.
If one tenant dies, the other tenants inherit their share - even if a will says differently. If you sell the property, you share the profits are shared, and remortgaging needs to be completed together. All tenants will need to agree before you can sell the house. It is possible to get out of a joint tenant mortgage, but it can be complicated. The most straightforward way if often to sell the property and split the proceeds.
Tenants in common
Tenants in common arrangements are distinctive to join tenant arrangements as they allow you to own separate shares in a property.
You can split the ownership in any formation, and this does not have to be an equal split. You can also sell your share in the property separately to others, and even leave it in a will for others to own.
What about four-person buy to let mortgages?
There are lenders who will lend to multiple applicants buying a buy-to-let property.
As with residential mortgages, some lenders cap the number of applicants to three, and a few will cap at four. Beware, there are specific tax implications on the income received from the rental of buy to let property - make sure you understand this before proceeding with a mortgage application and eventual sale.
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How can my family help me to get a mortgage?
A 'family offset mortgage' is where the buyer contributes a small percentage of the deposit (5%), and a family member saves a larger percentage (20%) in a bank account that links to the mortgage.
The money cannot be accessed but allows the buyer to obtain a better deal on their mortgage with a reduced LTV. For multiple mortgages, the money cannot be taken by the other applicants and is retained by the original owner. This makes this sort of arrangement attractive to parents whose child is buying their first home with multiple applicants.
Can a family member act as a guarantor on my mortgage?
A guarantor mortgage is where a family member guarantees mortgage repayments if you cannot meet them for any reason.
If you default on repayments, the guarantor will be required to step in and make payments. If they do not make repayments, their own home may be repossessed. To qualify, the family member will need to have considerable equity in their own home.
Four-person mortgages with bad credit applicants
The impact of bad credit will depend on the age and severity of the issue.
However, any bad credit will still have an impact on the other applicants. You may find that the mortgage lender compensates for the increased risk of bad credit by offering a higher interest rate, although there are still great deals available for those with credit problems. If you know that there is an issue with bad credit, it may be worth spending some time before your application to improve your credit score.
- Access and understand your credit history - there are a number of credit agencies that mortgage providers check. It may be that there are easy fixes you can do to improve your score.
- Spend sensibly on cards and pay it back - by demonstrating you are a viable borrower, you are seen as lower risk in the eyes of a potential lender.
Read our guide to mortgaging with bad credit to learn more.
Deposit source on four-person mortgages
The source of the deposit for the property purchase is fundamental to lenders.
If gifted by a relative, there is an order of precedence of acceptability starting with parents, moving down to grandparents, cousins and nieces etc. There are very few lenders who accept gifted deposits from friends, for example. You are unlikely to find a lender who will accept the person gifting the deposit to live in the property without being on the mortgage. Get in touch with one of our team to learn more.
How can I learn more?
If you are interested in learning more or applying for a four-person mortgage, complete our simple online form to start the process.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 29 February 2024