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Joint mortgages: five top tips

Your Money
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Your Money

If you are considering taking out a joint mortgage, make sure to keep these tips from broker, Oportfolio, in mind.

1.       Don’t think you have to get married to share a mortgage

Nowadays, you don’t have to be married to get a joint mortgage. However, if you are friends or partners who are co-habiting it can be more difficult to get a mortgage approval than if you are married. Even though it is not important to have the same surname, it is a good idea for each party to seek independent advice before entering into such a serious commitment.

2.       Ensure both parties are able to meet the repayments in the event of divorce or separation

If one party abandons the marital home, the mortgage lender is entitled to insist that the remaining party covers both parts of the mortgage. Even if your name is not on the mortgage and you wish to continue living in the marital home, you are responsible for meeting regular mortgage payments. If you do not keep up payments on your loan in the event of a divorce or separation, the lender is within its rights to evict you from the property.

3.       Inform your mortgage lender immediately if you are divorced, separated or recently widowed

It is crucial to speak to your mortgage lender as soon as possible should your circumstances take a turn for the worst. The majority of lenders will be sympathetic to your case and will offer a payment holiday. In an ideal world, it is easiest to sell the property and split the proceeds. However, in many cases, one person wishes to remain in the marital home, in which case they may need to borrow the equity to buy their partner out and then demonstrate to the lender their ability to afford the repayments on their own. The good news is that often your existing mortgage can stay in place so you do not have to refinance.

4.       Your husband or wife’s credit score may have a detrimental impact on your ability to get a mortgage approval

Before you are married, you will have an individual credit score based on your assets, liabilities and sources of income. When you come to have a joint mortgage, the lender will consider the combined assets and liabilities of both parties before making a decision as to whether or not to approve your loan. In some cases, one spouse may have a worse credit score than the other which could prevent you from getting an approval on your loan. Usually, the lender or broker will recommend that you try to get the loan based only on the credit and income of the individual with the best score. If you choose to do this, you can still have both names listed on the title, which will mean you are still joint homeowners.

5.       If you wish to add a spouse to an existing mortgage, take account of additional costs

You must contact your lender if you wish to add a new spouse to an existing mortgage. It is a very important financial decision and must be taken seriously. It is a good idea for both parties to seek independent legal advice before entering into such a decision. Bear in mind that there will be additional costs involved, such as arrangement fees and stamp duty fees.

Having a ‘tenants in common’ agreement in place is a sensible idea for couples who are looking to add a new spouse to their mortgage. This ensures that each party gets back what they invest or put in to the property in fair proportions in the event of a divorce.