Joint Mortgage With Parents

Who pays a joint mortgage? Is it split 50-50?

Typically, no. It would normally be paid by the ‘proprietor’ – the main owner. Many mortgages of this type are ‘Joint Borrower Sole Proprietor’ products, where the affordability assessment is based on multiple individuals, but there’s one main owner. That might be a couple, and the parents might be the additional borrowers.

If the proprietor(s) couldn’t keep up the payment, the parents are expected to pay. They are almost guaranteeing that mortgage and will need to pay it if the proprietor can’t.

Typically, though, people want to pay this on their own – that backup is more to give the lender confidence that the payments will be maintained.

How do mortgage lenders assess affordability on a joint mortgage with parents?

They will look at it on a full affordability basis, taking into account your income and outgoings, and also that of the parents as well.

If your parents have huge debts and low income, they’re probably not going to help you much on the affordability front. If you don’t need them for affordability, I would question why you want to take this approach.

Lenders look at everything just like a normal residential mortgage. Every applicant will go through that affordability assessment.

Can I get a joint mortgage with other family or friends?

Yes, you can. Some lenders only accept family members and some are specific about which ones. But other lenders allow this type of borrowing with a friend or more distant relative.

You always need the right advice and guidance before taking this approach, though.

What happens if only one person pays the mortgage?

Generally that’s fine. It’s on you as joint owners or joint borrowers to decide what happens.

The lender just wants to know their mortgage is being paid.

If, however, you can’t pay your mortgage, then the other person or people on the mortgage will be liable for the full payment. You can’t just get away scot-free. Everyone named on the mortgage is liable for that debt.

What alternatives are there to a joint mortgage with parents?

There are actually quite a few different options. It’s good to see that a lot of lenders are supporting first-time buyers onto the property ladder – especially those that might otherwise have struggled.

There’s one option where a lender will look at the rent you’re currently paying. If you’ve paid it for a long enough period of time and your mortgage payment will be less than that amount, the lender will give you a mortgage without any deposit.

There are obviously certain caveats – and for that particular scheme, you would tie in for five years. By doing that, you’re repaying the capital and the interest and in five years’ time, you will have reduced your borrowing against the value of the property.

There are other options where lenders only require a very small deposit. One, for example, only needs you to put down £5,000 on a property worth up to £500,000. That could be just a 1% deposit.

There are different routes to potentially buy a property that you might not know about.

You’ve demonstrated how mortgage brokers can help – any final thoughts?

These situations really show the value of a good mortgage adviser. Quite commonly people don’t know these products exist before they speak to us. It might often be that your Plan A hasn’t quite worked out, so we can apply some creative thinking to help you achieve your goals.

This is quite a complex situation in terms of legal ownership and what happens if things go wrong. Getting good quality legal advice as well as good mortgage advice is really important.

In fact, some lenders insist that all parties get independent legal advice on this because it’s so complicated.

Key Takeaways:

• A Joint Borrower Sole Proprietor (JBSP) mortgage allows parents to be joint borrowers to help with affordability while the child remains the sole legal owner of the property.
• While some lenders have a maximum age limit, retired parents can be included if they have sufficient pension income to support the application.
• The legal arrangement can be either Joint Tenants (equal share, automatic inheritance to co-owner) or Tenants in Common (can hold different percentages, pass share via will/heirs), and the choice has significant legal implications.
• Although the main owner (proprietor) is expected to make the payments, all parties named on the mortgage (including the parents) are fully liable for the debt if payments cannot be maintained.
• Other options are available, such as small deposit schemes. Due to the legal complexity, seeking both good quality mortgage advice and independent legal advice is strongly recommended.

Your home may be repossessed if you do not keep up repayments on your mortgage.