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Buying a Property with a Friend or Partner?

Property inflation has outstripped wage increases over the years. In order to be able to afford a suitable property many people feel the need to buy with another person. This is because two incomes are then contributing to the payments so the costs are shared and lenders can also take the two incomes into account when calculating your maximum mortgage amount. Although, there are risks to be considered which will be answered throughout this article.

How many people can jointly own a property? 

Some lenders often allow up to four people to jointly co-own a property. If, for any reason, a borrower stops their contributions towards the mortgage payments then any joint owners have a legal right to stay in their home unless a court rules otherwise. Because of this, it’s best to be very aware of who the property is bought with.

If the borrowers wish to increase the mortgage later down the line then all borrowers will need to consent. So this will mean it’s important that long term plans are made should circumstances change or the borrowers end up wanting different things.

Joint Tenancy or Tenancy in Common? 

Most married couples tend to opt for joint tenancy. If either applicant were to die then the property passes to the other owner. If mortgage life insurance has been taken out then the mortgage would be repaid at that point also. Consent will be needed from the other applicant if there is thoughts of selling or remortgaging the property in the future.

Tenants in common is sometimes chosen by relatives or friends that buy together. They will still jointly own the property but are not forced to do so in equal shares. This makes sense more if one party is contributing a bigger financial input than the other.  

An applicant can act individually if they are a tenant in common. For example, the share of the property is able to be sold or given away.

What happens if one party stops making mortgage payments? 

All mortgage borrowers are jointly and severally liable for mortgage payments. If one of the parties stops paying then the other(s) will have to make up for the shortfall to prevent the mortgage from falling into arrears. Any arrears that appear may stop you from getting a mortgage in the future.

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