Multi-Applicant Mortgage
- Free Initial Consultation
- See if we can help you find the right deal
- Specialist Mortgage Advisers
Request A Callback
Multi-Applicant Mortgage
Steven Hargreaves explains how a multi-applicant mortgage works.
What is a multi-applicant mortgage? Can this also be called a multi-person mortgage?
It can, yes. Many buying situations come down to affordability. As an example, if you and I were buying together and we couldn’t afford a property on our joint incomes, we could potentially add someone else to that mortgage.
They would partly own that property, but it means that we can get on the first rung of the property ladder.
I’m just doing one at the moment for a family of three people, where they needed the daughter’s income to support the full amount for the new mortgage.
It’s worked out very nicely. It means the daughter owns the property as well. The parents on their own couldn’t have afforded the mortgage – we couldn’t get to the figure required to purchase the property.
How many people can be named on a mortgage? How does this differ from a joint mortgage?
A joint mortgage is just for two people buying. In the example I’ve given you there are three people, but some lenders accept up to four.
You do have to be a little bit wary because in some cases, some lenders will only use the first two incomes. So while there may be three or four people on that mortgage, not all incomes contribute towards affordability. Other lenders will include all the incomes, so it can get tricky.
There’s another thing to bear in mind – in the example I’ve given, the daughter is actually a First Time Buyer. Because of that she would normally get stamp duty relief up to a certain amount.
She’s now on this mortgage with her mum and dad, and at some stage mum and dad will probably buy her share out and release her from the mortgage. It might be at the point when she wants to buy a property herself, perhaps with a partner.
But at that point she wouldn’t be classed as a First Time Buyer, because she’s already had a mortgage. I spoke to the daughter specifically about that, to chat through not just the positives but the negatives of it. Everything’s got to be taken into account before you make a final decision.
Who can get a multiple applicant mortgage? Who is eligible?
It doesn’t necessarily have to be family. It can be friends, more distant relations, or a boyfriend, girlfriend and their friends.
How do multi-applicant or multi-person mortgages differ from standard mortgages?
In the example I’ve given, the stamp duty is an important difference, but other than that, there aren’t any major differences.
There’s just a third or fourth party on that mortgage. In my example, it’s a family so it would be set up so that if one of the applicants dies, their equity would be shared equally between the other two. But how you do that will depend whether it’s family or friends that are buying.
What types of properties can you get a multi-applicant mortgage on? Are there any restrictions?
It can be any property, whether you’re going down the Buy to Let route, or a residential purchase. Whether it’s a detached house or flat, it makes no difference at all.
Speak To An Expert
Our team of experts are experienced in catering for a range of clients, needs and property types. With a vast array of qualifications and accreditation from the financial accreditation agency you can be confident of quality service and sound advice.
How is ownership split?
In my case example, if the mum were to die, the house would be shared equally between dad and daughter. If the daughter was to die, it would be between mum and dad, etc. That’s how they’ve got it set up.
The alternative is as ‘tenants in common’. If friends were buying together and one of them died, they may want their share to go to their next of kin rather than one of the other two property owners. That would be set up as tenants in common rather than joint tenants.
You would ordinarily speak to a solicitor about that. They would explain the difference and how it works. Each person might differ in what they want to do with their third or quarter of the house. It really is down to personal circumstances.
How much can we borrow for a multi applicant mortgage?
It’s the same Loan to Value as with a joint mortgage or a single mortgage. There’s a maximum of 95%, but if you can reach 90%, 85%, 80% it tends to be on a cheaper interest rate.
That happens right across the board with all mortgages. The bigger the deposit, the lower the interest rate and the cheaper the payments. The borrowing amount will be down to the combined incomes.
What are the benefits of a multi-applicant mortgage? Are there any risks to consider?
One risk is that if somebody’s a First Time Buyer but the others aren’t, they lose access to the stamp duty incentive.
In my example, the parents own a property at the moment so all three of them are classed as home movers. The daughter has lost her First Time Buyer rights on that. They’ve gone, because she has now owned a property.
The benefits of a multi-applicant mortgage are that you can borrow considerably more towards a property. You’re potentially using three or four incomes to support that mortgage rather than two people’s. The affordability is considerably higher.
There are some setbacks to consider. If you wanted to sell that house in years to come but the other two or three people didn’t, you would have to negotiate with them to buy your share – which would be subject to their income being sufficient. If it isn’t, you’ve nowhere to go.
So there are some risks involved with it, but as long as you go into it with your eyes wide open, you will be aware of all the pros, cons and any issues. A broker will always highlight these things for you to deal with at the outset.
Are there any alternative options to a multi-applicant mortgage?
The obvious one is Joint Borrower Sole Proprietor, where somebody else’s income supports your mortgage as well as your own. It may be mum and dad’s income on a young couple’s property. If they’re on quite low incomes at this stage and want to buy something a bit higher priced, they could use mum and dad’s income.
The benefit of a Joint Borrower Sole Proprietor is it doesn’t affect the stamp duty for the parents, and the First Time Buyers still get the stamp duty break.
Joint Borrower Sole Proprietor is not an option in every case because we need to look at how old parents or relatives are – that does have an effect on the mortgage term, so it’s very much dependent on the details of each situation.
You’ve demonstrated how a mortgage broker can help as always, but is there anything else you’d like to add?
If you’re working with a good mortgage advisor, they will talk you through the different options, how they work, the pros and the cons and lead you to the best lender for your case.
The best lender isn’t always the cheapest one – it’s the most suitable for your circumstances. Your advisor would walk and talk you through it, explaining the pros and cons, working out who’s going to be the best lender for you and placing you with that lender.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
Useful Links
Why MortgageCo?
- Raising The standards of financial advice
- Making financial advice accessible to all
- Trusted & stress-free financial advice
- Friendly, personable advisors
