Multiple person mortgage

Multiple person mortgage

Although most mortgage lenders restrict the number of applicants to a mortgage agreement to two, there are options for those who need to join together to purchase a property.

Multiple-applicant mortgages are more difficult to get, but they can be obtained with the right advice from an experienced broker.

As mortgage brokers, we have a few mortgage providers lending a guarantor mortgage or a joint mortgage daily. A multiple applicant mortgage makes the mortgage repayments easier.

Our guide to a multiple-applicant mortgage will help you understand how many people can apply for a mortgage, how to obtain a mortgage with more applicants, the alternatives you have and how to locate a specialist mortgage broker.

When you enquire, our mortgage brokers answer the most common questions on this topic in our FAQ section.

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What is a multi-person mortgage?

A multiple person mortgage has more than two individuals on it. However, not all mortgage lenders allow more than two applicants for joint mortgages.

Some lenders will allow you to group with more than two people. However, they may limit the income of applicants.

You might be looking for multiple-applicant mortgages. This arrangement would allow all incomes to be declared, increasing your affordability. It is possible, but it may require expert advice from a broker specialising in multi-applicant mortgages.

What is the maximum number of people listed on a mortgage?

Three to four people are the usual maximum. However, the answers to this question vary from lender to lender. Several mortgage lenders will lend to two people on a joint agreement. This applies not only to married couples or civil partners but also to friends buying the property together.

If more than one person lives on the property, some providers will lend to them. This is sometimes called a joint borrower-sole proprietor agreement (more details later).

Three-person mortgages

Although obtaining a mortgage for three people is possible, some lenders won’t allow this unless all applicants are related by blood. While some lenders will allow family members and friends to be listed on the same deeds, they won’t permit all three applicants to declare their income during affordability assessments (limiting this to two).

A broker specialising in multi-applicant mortgages is the best way to get approved for a three-way mortgage. A mortgage broker has strong working relationships with lenders that offer these agreements with minimal conditions, so you can be sure you will find the right lender the first time.

Multiple-person mortgages offer many benefits

Multiple applicants may be eligible for a mortgage. There are many reasons this can work.

• You can put down more deposits. It’s possible to have more than one deposit. This allows friends and family to pool their resources to make a larger deposit than they could handle. This has many benefits. For example, a larger deposit can mean you can access more favourable rates and deals. You would also need to borrow less if you had only one deposit.
• Combining income makes payments more affordable. A single buyer can often make monthly repayments for a mortgage that seems daunting to a single buyer.
• You might be able to borrow more together. Multiple applicants’ mortgages are calculated on the same income basis as an individual application. Your mortgage limit will be £150k if your income is £30k. You could borrow up 5x as much. Two additional applicants with the same income could increase it to £90k. At 5x income, a maximum loan amount of £450k would be available.

Calculating the maximum amount of a mortgage

Some mortgage lenders won’t consider the combined income of two of the highest-earning individuals when determining the maximum amount they can borrow to finance a multi-person mortgage. Instead, they will use a multiplier of their combined salary to determine the loan amount.

Some lenders may be willing to consider income from multiple applicants. Only specialist lenders can accept income from four applicants for the same mortgage.

Lenders generally limit lending to income up to 4.5 times, but some will lend up to 6 or 5 times combined income. Lenders are less likely to consider applicants whose income exceeds 5-6 times the income limit.

How to get a mortgage loan for four people

Finding a lender willing to lend mortgages to four applicants based on their combined income and deposit amounts is the biggest problem. A small number of mortgage lenders will let this many applicants sign a single agreement. If you want all applicants to have their funds declared, there are only a few options.

A mortgage broker, who is familiar with these types of deals every day, is the best way to obtain a four-person mortgage. The market is so limited that it’s difficult to find a lender you can trust. You will be able to increase your chances of approval by having a strong working relationship with lenders that offer multiple-person mortgages in these situations.

Four applicants can make the application process more difficult. There are four sets of paperwork and additional considerations. A broker can help with this. A broker can help you navigate the application process from beginning to end and ensure that all documents are correctly filled out.

Other family mortgage options

There are many other options for obtaining a family mortgage or a family-assisted mortgage. You don’t have to apply as many applicants. These are the most common alternatives.

Mortgages that are family-friendly

This arrangement may be a good option if you have a small deposit and a family member willing to assist you financially.

A family offset mortgage requires that the buyer deposit 5%. This can be a gift or put into a bank account.

The money can’t be accessed while it is still in the bank. You can save money as a grubstake. This deposit will help you get a mortgage at a lower interest rate. The savings will be deducted from the loan’s value. This arrangement is attractive for parents whose child buys the first property in a group of applicants.

The parents cannot take the money of any other party if there is a dispute between applicants. They will keep ownership of the funds. However, they will need to keep their money safe for longer, typically until their mortgage is 75-80% of property value.

Guarantor mortgages

If you cannot get approved for a mortgage or cannot afford one, a guarantor loan may be what you need. The family member acts as a guarantor if you cannot repay the mortgage.

To increase your equity, the guarantor must either guarantee your mortgage against a property they own or deposit savings into an account owned by the lender. The guarantee must contribute 25% equity. Your family member will not have to pay if you continue making your payments.

If you fail to make your loan payments or are unable, there is a risk for your family member. They may have to pay the loan back. Their home could be taken away in the worst-case scenario.

Standard joint mortgage

A joint mortgage allows the buyer and their family to take out a normal mortgage and share the property’s ownership and the liability for the mortgage. It is simpler to set up, and the family will share any losses or gains.

Joint borrower sole proprietor mortgages

A joint borrower sole proprietor mortgage allows multiple people to make mortgage payments while the lone applicant lives on the property and is not named on the deeds. They may be an option if you have relatives willing to assist you with your mortgage payments but don’t own a stake in the property.

Read more about joint borrower sole proprietor mortgages

What is the best way to get a mortgage together with friends?

Yes. You can buy a property together with friends. However, the lender might limit the number of people applying for a mortgage or the incomes allowed.

This applies to all who…

• You can add friends to your mortgage to increase the likelihood of approval (affordability and deposit).
• You and your partner may be interested in purchasing a house together to share.

Protecting your investment in the property may be worthwhile if you are buying with friends.

Common ownership as tenants

This is an alternative option to buying as joint tenants. It involves purchasing a property with another person, where neither party owns equal parts and can decide what happens to their share if the other party dies.

Experts recommend that you have a Deed Of Trust prepared by a solicitor if you get a joint mortgage. This will outline who is entitled to what.

Multiple applicants with bad credit can get a mortgage

Mortgage applicants generally respond as fast as the slowest vehicle, i.e. Lenders will still consider bad credit if there is one applicant with bad credit and the other has clean credit.

For example, if you have three applicants for a mortgage, and one of them has credit problems, This could mean that you might pay a slightly higher rate depending on how severe and recent your credit problems are. The current interest rates and mortgage deals available to those with bad credit looking for a mortgage are very competitive. Many people are amazed at how attractive these rates are.

However, some cases are where borrowers might still be eligible to apply in their sole names, especially if the borrower has more serious issues and is not otherwise eligible.

Lenders will consider not only the credit scores of all applicants but also all your incomes, debt-to-income ratios, and the amount of deposit you can accumulate.

You can raise your credit score if one of your applicants has poor credit. However, it may not be enough to allow you to all borrow from the lender at the most favourable terms.

Asking for the support of a co-borrower with good credit and a high income to help you get the loan is one solution. As mentioned earlier, this could be a relative. The co-borrower should be aware that missed payments can result in their beneficiary losing their credit rating. You could later add the applicant with bad credit if you took out a mortgage without them.

Multiple applicants for a buy-to-let mortgage

The lender will determine how many people can apply for a buy-to-let mortgage. Lenders will sometimes lend to multiple applicants. For example, a mortgage to three or more people looking to buy an investment property.

Many lenders will lend up to four applicants to buy a residential property. Some lenders will only consider income from two applicants, while others may consider a mortgage for three or more applicants.

The limited company buys to let

Multiple applicants can become shareholders in a limited company to reduce the tax they will have to pay as landlords. A limited company pays corporation tax instead of paying income tax individually. The current rate is 19%.

The theory is that you can continue to declare rental income even after taking out the mortgage. You should research and seek expert advice, as even these tax savings could make you significantly less fortunate.

Tax implications

You no longer have to pay tax on the difference between your rental income and mortgage interest payments. Instead, you can claim tax relief for 20% of interest payments.

Your total income may push you into the higher tax bracket if you earn a salary and income from a buy-to-let property. You may not get the same benefits under the new system, but a 20% tax relief could significantly reduce your benefits.

Talk to an expert

A mortgage broker is a specialist in complex mortgage arrangements and should be your first point of contact if you are applying for multiple applicants.

If you have multiple applicants, they can help you identify the most likely lender to approve your mortgage. They will also allow you to declare income for each applicant.

Our broker-matching service is free and can match you with an expert in multiple-applicant loans. We’ll take into consideration your circumstances and match you with an advisor who has the knowledge and expertise you need to get the mortgage that you desire.

Call today or complete an enquiry form to arrange a complimentary, no-obligation meeting between you and your ideal broker.

Multiple person mortgage lenders FAQ’s

Who can take a joint mortgage?

While spouses typically take out joint mortgages, lenders will allow two family members to get one together.

How can you divide the ownership of multiple-mortgage properties?

A joint tenant’s mortgage is required if you want to purchase equal property shares.

This means:

• You will split the proceeds equally if you decide to sell the property.
• If one tenant dies, the rest of the borrowers inherit the deceased’s portion of the property.
• One tenant can decide at any time that they wish to leave the property and sell their portion. The other tenants have two options: they can buy the share or borrow money to purchase it. This decision will be made by the mortgage company that will evaluate whether the applicants can afford the more expensive mortgage payments.

You can apply for a tenant in a common mortgage if each applicant desires a predetermined share of the property. This agreement will allow you to share equal amounts or a portion of the property legally. A ‘Deed of Trust’ is a legal document specifying each applicant’s percentages (prepared by a solicitor).

Anyone who wants to sell their part of the property must follow the same rules as joint tenants.

You may decide that you all want to sell the property and divide the proceeds between you according to your Deed of Trust percentages. You can also sell or grant your share in the property by issuing a Will.

You should be aware that a joint mortgage can affect your credit score and impact how lenders view you in the future.

What effect will the deposit source have upon multiple applicants’ mortgages?

Deposits from a lot of lenders need to come from the mortgage holder. While it is fine for someone to gift a deposit, lenders may restrict who they accept. Direct family relationships are the most common. However, some lenders are more comfortable with distant relatives (cousins and uncles, nephews, etc.). You can have up to 3 people on your mortgage, including business partners, friends, and family members.

Lenders will accept gifted deposits from relatives, which you can use to increase your savings and supplement any contributions from a Help To Buy scheme. The lender’s approval criteria for gifted deposits vary, but there is a clear hierarchy.

A majority of lenders will accept a loan from parents. If they are unable to accept it, the lender will then accept from:

• Grandparents
• Brothers and sisters
• Aunts and uncles
• Extended family
• Although it is not possible to make gifted deposits from friends, some lenders will consider them.

Most lenders will decline a gift of a deposit if the person lives in the property and is not on the mortgage. However, there are a few exceptions.

Contact us today to discuss joint mortgages.