Multi Person Mortgages

What is a multi-applicant mortgage or a multi-person mortgage?

Both are the same thing. A multi-applicant or multi-person mortgage is essentially a home loan with more than two people named as borrowers. It allows a group of people, friends or family to combine their financial resources to buy a property together.

All the applicants share the debt and the responsibility for that mortgage. All the applicants will be jointly liable for the mortgage repayments, so if one can’t pay, the others will need to make up the difference – otherwise it could affect everybody’s credit score.

Usually we see this used by groups of friends or family who wouldn’t be able to buy the type of property they’re looking for on their own. They’re pooling their incomes and savings to make getting that home more achievable.

It’s popular with young professionals. We’ve done one recently for a group of trainee solicitors who bought a house just outside London.

How many people can be named on a mortgage? How does this differ from a joint mortgage?

Most lenders that accept this would allow up to four people on a single mortgage application. That’s because the number of people that can be named as owners of a property is limited to four.

However, many high street lenders will actually cap the number of applicants at two. Each will have their own rules. For example, they may say that only close family members or people in a long-term relationship can buy together.

Also, if you go down this route, whether there are two or four of you, you’ll all share equal liability for the debt.

Who can get a multiple applicant mortgage? Who is eligible for one?

Anyone can apply for a multi-applicant mortgage, but each lender will have their own rules. It’s probably easiest to speak to a mortgage broker to help you narrow down those options, rather than knock on every lender’s door and ask for help.

You will need to meet the lender’s standard requirements, which involve looking at everybody’s income, bank statements, credit history and other loans and credit cards. Some lenders will want a clear relationship between you all. They may say you need to be family members, are in a long-term relationship or have known each other for a period of time.

The idea is to minimise future risk. Generally, it’s to ensure you’ve got a stable relationship and you’ll have a consistent living arrangement without disputes. They don’t want people who have just met asking for a mortgage together.

How do multi-applicant or multi-person mortgages differ from standard mortgages?

There aren’t any real major differences in terms of the mortgages themselves. It’s just going to be based on that lender’s products, pricing, interest rates and fees.

The good thing is that multi-applicants clubbing together will be likely to have a higher deposit, which means that you might get a better deal on your mortgage. With a better Loan to Value, resulting from that deposit, you could get a better interest rate.

What types of properties can you get multi-person or multi-applicant mortgages on?

There are no real special property restrictions, other than that lender’s standard criteria and requirements. If you wanted to buy a house or a flat together, that shouldn’t be an issue.

But it needs to make sense. Lenders are not likely to give you a mortgage on a one-bedroom flat if four of you plan on living there – that’s just not feasible.

Also, if you’re not actually looking to live in the property and you want to rent it out, we need to look at a Buy to Let mortgage instead of a residential one. The criteria for that may be different, but generally speaking, it’s still perfectly achievable as a multi-applicant purchase.

How is ownership split?

I’m not a legal expert, so your solicitor would give you the full advice as to the best ownership model for you.

Generally, there are two types of ownership. The first is joint tenancy, where all owners of the property own 100% of the property, without any divisible shares. You each own 100%. No one person in that scenario can decide to sell the property. If one of you dies, your share passes to the others rather than to your estate or your family.

The other type is tenants in common, where each owner holds a defined percentage of the property. These can be equal or unequal amounts. If, for example, four of you all put in exactly the same amount of deposit and are sharing the mortgage in the same percentage, you might hold equal shares of ownership.

If one of you is putting in more, they may have a higher percentage share ownership. The big difference here is that if one of the owners dies in this scenario, their shareholding is passed on in accordance with their estate or their Will. You can decide to sell your share, but it is more complicated if there’s a mortgage involved, because that needs to be taken into account when you sell.

Most applicants tend to go down the tenants in common route. But your own solicitor or conveyancer will go through the options with you in more detail to help you make the right decision. No matter how you own the property, from a mortgage perspective you still will be jointly liable for the whole mortgage and making the mortgage payments.