4 Person Mortgage
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4 Person Mortgage
Can I get a mortgage with four people? Can a house be owned by four people?
Absolutely, yes. It’s not commonly known – typically one or two people tend to buy together, but you can certainly go up to four.
Not very many lenders allow four people, and those that do have specific criteria. If you’re named on the mortgage, normally all four of you would also be required to own the property.
Can you get a mortgage with friends?
Yes, you can get a mortgage with friends. You would need a good, strong relationship with those friends, so go in carefully.
It is very niche and not many lenders allow that, as it could become quite complex further down the line. The recommendation is to seek specific legal advice around where you stand when you’re buying with friends.
How do mortgages with four or more applicants work?
The lenders that allow four applicants typically only use two of the salaries. If all four of you are working, that’s great, but to maximise the mortgage you can borrow it’s best to use the highest two salaries out of the four.
That gives you more borrowing capacity, even if all four of you put in an equal share – or not. It doesn’t matter in terms of deposit, but it does allow the four of you to get maximum lending capacity.
Be aware that although they’re only using two salaries, the lender will actually look at all four sets of outgoings. If one of you has credit issues that could affect the application, or one has more outgoings than the others, that will be factored in. Two salaries will essentially carry the weight of all four outgoings.
What deposit do you need? How much can you borrow with four people on a mortgage?
The deposit is in line with the industry standard, although if you can go in with 10% that will get you more credibility. It’s a very niche market and lenders are very specific with their criteria, so 10% is better than 5%, which is the absolute minimum deposit.
It doesn’t matter if only one of you is putting that cash in or you’re splitting it across all four, as long as you can evidence where that deposit is coming from.
In terms of borrowing power, very rarely will lenders use all four incomes – it’s usually two out of the four. The maximum mortgage you can get will be assessed in line with whether the monthly repayments are affordable. Ultimately, it comes down to your budget and how you’re going to split it between four.
What documents do you need with four people on the same mortgage?
The main thing is that we need four sets of documents. We would guide you as to exactly what’s needed at the time, because it will depend on what your income structures look like.
While typically two salaries are used, it’s good to know what the other parties are earning. We would still look at all payslips and P60s. If any of you are self-employed, we’d look at your last two years’ accounts.
You all need to provide personal bank statements, typically for four months, to help us understand your outgoings, your budget and your spending habits. We also need proof of the deposit and copies of your credit files.
When you look for a solicitor to help with the house purchase, a lender may have specific requirements for each of you to take independent legal advice. That’s because you are going to be legally owning the property together.
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Does it cost to add someone to a mortgage?
Remember the very maximum is four people. So let’s say we’ve got two people on a mortgage and they want to add a third person. That doesn’t cost from a mortgage perspective, other than the usual lender charges and potentially broker fees. Both of those would be disclosed to you upfront.
It’s more about the administration involved to add a third or fourth person to an existing mortgage and whether the lender will allow it.
You would also need to talk to a solicitor, because the additional borrower would also need to be on the property deeds. A solicitor will confirm if there are any additional legal costs and implications.
With four people on a mortgage, it’s important to recognise you have equal liability. Again, there may be additional legal fees to get independent advice, depending on how you plan to split the deposit and the repayments on that mortgage.
Do you pay stamp duty when adding someone to a mortgage? Are there any other costs we need to know about?
There could well be a stamp duty liability. HMRC found that there were loopholes in the past. If somebody now buys a house in just their name and wants to add their partner, parent or child, they need to seek legal advice to confirm the implications and any stamp duty costs.
There shouldn’t be any other costs other than the additional legal fees.
What are the pros and cons of having four people on a mortgage?
The pros are that you can spread the affordability and maximise your borrowing capacity. Also, depending on how you want to split the payments, you don’t have that heavy burden of paying the mortgage yourself. You can share the bills four ways, hypothetically.
The downside is that it’s a huge commitment. It really depends on who you’re going in with and the long-term consequences. You will also have to agree on the same property, the area and whether the home is sizable enough for you all to live there comfortably.
You need to have very close relationships with the others and go in with an open mind.
Which lenders offer mortgages to groups of four or more people?
It’s very niche. Usually a mortgage is for two people, and possibly three. Only a small handful of lenders will do four, which is why we have to be very specific to their criteria and do all the additional checks before we go ahead.
How do I get a four person mortgage or a multi-applicant mortgage? How can a mortgage broker help?
With just a handful of lenders available, it’s good to speak to a broker because we have those contacts. Each lender usually has a business development manager who will know the criteria inside out.
We also hold your hand through the process – because it’s complex. There’ll be more paperwork and more due diligence to do. Working with a broker will take that pressure off of your hands – and with four of you involved, communication is important. That takes a lot of coordination, as well.
Key Takeaways:
- While typically one or two people buy together, it is possible to get a mortgage with up to four people, though it is a very niche market with only a handful of lenders offering this product.
- Lenders usually calculate borrowing capacity based on only the two highest salaries but will factor in all four applicants’ outgoings and credit issues when assessing the application.
- The minimum deposit required is 5%, but a 10% deposit is recommended to increase credibility and meet the specific criteria of the few available lenders.
- Due to the complexity and the equal liability shared by all four parties, seeking specific independent legal advice is strongly recommended, especially when buying with friends or when splitting the deposit and repayments.
- A mortgage broker can simplify the complex process, as they have contacts with the small number of lenders who offer four-person mortgages and can handle the necessary coordination and extensive paperwork.
YOUR HOME IS AT RISK IF YOU FAIL TO KEEP UP PAYMENTS ON YOUR MORTGAGE OR ANY OTHER LOANS SECURED AGAINST IT.
For specialist tax advice, please refer to an accountant or tax specialist.
