With house prices at an all-time high, there is an ever-increasing need for people to pool their resources together. This could be to use additional income or deposits or simply as a family arrangement. In this guide, I will explain all the options available to people looking to get a joint mortgage with three or more people.
How many people can apply for a mortgage together?
Most lenders usually consider between two to four applicants for a mortgage. However, some lenders will only allow you to use two of the incomes, while others will allow you to use all of them. It’s more common for lenders to only allow the use of two incomes.
What reasons may someone want to get a mortgage with 3 or 4 people?
There are several reasons why individuals or groups may consider getting a mortgage with three or four people:
- Increased affordability: Combining incomes and resources can make it easier to qualify for a larger mortgage than if only one or two people were applying.
- Shared responsibility: With multiple people on the mortgage, the responsibility for the mortgage payments is shared, reducing the burden on any one individual.
- Shared investment: By pooling resources, all parties involved have a financial stake in the property, which can make the investment more secure.
- Family arrangement: In some cases, families or extended families may choose to purchase a property together to share the cost and responsibility.
- Investment opportunity: A group of investors may choose to purchase a property together as an investment opportunity, sharing the risk and potential rewards.
Challenges of getting a mortgage and buying with 3 or 4 people
While buying a property with three or four people can have its benefits, there are also some challenges that may arise:
- Potential disagreements: With multiple people involved, there may be disagreements over the property’s use, upkeep, or eventual sale.
- Liability: Each person on the mortgage is jointly and severally liable for the debt. If one person defaults on their payments, it can impact everyone else on the mortgage.
- Complexity: Buying a property with multiple people can be a complex process, requiring clear communication and agreement on various details such as financing, ownership shares, and responsibilities for upkeep and maintenance.
- Funding challenges: Lenders may have stricter requirements for mortgages with multiple borrowers, such as higher credit scores or down payment percentages.
- Exit strategies: It can be challenging to plan an exit strategy for one or more parties who want to sell their share of the property. This can be further complicated if the property value has increased or decreased since the initial purchase.
How do mortgages for 3 applicants work?
Most mortgage lenders have a maximum limit on the number of applicants they will consider for a mortgage. In most cases, they will only accept the income of two applicants, usually the two highest earners, to determine affordability.
Using the example you provided, where one applicant earns £40,000 another earns £30,000 and the third earns £30,000, most lenders would only consider the £40,000 and £30,000 income, for a total of £70,000
This would be the maximum amount that could be used to determine the affordability of the mortgage.
However, some lenders may be more flexible and consider the income of all applicants, which could increase the amount that could be borrowed.
Applicant named on deed Annual income
Applicant A £40,000
Applicant B £30,000
Applicant C £30,000
Total income used £70,000
Applicant named on deed Annual income
Applicant A £40,000
Applicant B £30,000
Applicant C £30,000
Total income for used £100,000
Is it possible to get a mortgage with friends?
Yes, it is possible to get a mortgage with friends. Most lenders will allow you to buy a property with friends, as long as all parties are named on the mortgage and meet the lender’s eligibility criteria.
However, it’s important to note that some lenders may have specific requirements or restrictions when it comes to buying a property with friends. For example, some lenders may insist that all parties are related or have a close personal relationship, while others may be more flexible and allow friends to apply for a mortgage together.
How to get a multi-applicant mortgage?
Getting a multi-applicant mortgage can be a complex process, but here are the general steps to follow:
- Speak to a broker: It’s recommended to speak to a broker with experience in dealing with multi-applicant mortgages. They can help you understand the options available and guide you through the process.
- Gather documents: Each applicant will need to provide the necessary documents, such as proof of income, identification, and bank statements. Having these documents in order will help the application process go more smoothly.
- Check credit reports: Each applicant should check their credit report to ensure there are no errors or issues that could impact the application. If any issues are found, they should be addressed before applying for a mortgage.
- Obtain Agreement in Principle (AIP): Before applying for a mortgage, it’s recommended to obtain an Agreement in Principle (AIP) from a lender. This will give you an idea of how much you can borrow and help you to focus your property search.
- Find a property: Once you have an AIP, you can begin your property search. Be sure to factor in the needs and wants of all applicants when looking for a property.
- Apply for the mortgage: Once you have found a suitable property, you can apply for the mortgage. Be prepared for a potentially lengthy application process and be ready to provide additional documents or information if needed.
Which lenders offer mortgages to 3 or more people?
- Metro Bank – This lender considers all sources of income from up to four applicants, including employed, self-employed and rental income.
- Leeds Building Society – Leeds Building Society allows up to four applicants to apply for a mortgage, with all incomes considered to determine affordability.
- TSB – TSB allows up to four applicants to apply for a mortgage, with all incomes considered to determine affordability.
- Skipton Building Society – Skipton Building Society considers the income of up to four applicants for its mortgages, including employed, self-employed and rental income.
- Teachers Building Society – This lender specialises in mortgages for teachers and education professionals, and allows up to four applicants to apply, with all incomes considered.
- Coventry Building Society – Coventry Building Society allows up to four applicants to apply for a mortgage, with all incomes considered to determine affordability.
Can I add a third person to my mortgage?
Yes, if you already have an existing mortgage and want to add a third person to it, the process would involve a transfer of equity. This is where the ownership of the property is transferred from one or more existing owners to include the new third person.
As part of the transfer of equity process, the lender would typically conduct a new affordability assessment to ensure that all three parties can afford to maintain the mortgage payments. They may also require the third person to undergo a credit check and provide financial documentation such as bank statements and proof of income.
Can I remove a third applicant on a mortgage later?
Yes, it is possible to remove a third person from a mortgage at a later date, but it will depend on the specific circumstances and the lender’s criteria.
If the third person is a joint owner of the property, they will need to agree to the removal and sign legal documentation to transfer their ownership share to the remaining owner(s). The lender will typically require a new affordability assessment to ensure that the remaining owner(s) can afford the mortgage payments on their own.
How can I protect myself on a joint mortgage?
- Consider obtaining a declaration of trust, which is a legal document that outlines how the property is owned and what happens if one owner wants to sell their share or passes away.
- Have an open and honest discussion with the other owners before taking out the mortgage, and come to an agreement on how mortgage payments will be split and what happens in the event of a dispute.
- Consider obtaining life insurance to ensure that the mortgage can be paid off if one of the owners passes away.
- Be aware of each owner’s financial situation before entering into a joint mortgage, and ensure that everyone is able to make their share of the payments.
- Have a plan in place in case one of the owners loses their job or is unable to make their share of the payments.
- Consider obtaining legal advice before entering into a joint mortgage to ensure that your interests are protected.
How can Strive Mortgages help get a mortgage for 3 or 4 people?
Working with a mortgage broker like Strive Mortgages can be a valuable resource when seeking a mortgage for 3 or more applicants. Here are a few ways that a broker can help:
- Access to multiple lenders: A broker has access to a wide range of mortgage lenders and can help you find the ones that are most likely to consider your application.
- Expert advice: A broker can provide you with expert advice on the types of mortgages that are available to you, the best deals on the market, and which lenders are most likely to approve your application.
- Application assistance: A broker can help you with the application process, ensuring that all the necessary documentation is in order and submitted correctly.
- Negotiation: A broker can negotiate on your behalf with lenders to secure the best possible deal.
- Ongoing support: A broker can provide ongoing support throughout the mortgage process, answering any questions you may have and helping you to stay on track.