First Time Buyer Joint Mortgage
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First Time Buyer Joint Mortgage
How do joint mortgages work for First Time Buyers?
If you’re a couple buying together as First Time Buyers, the mortgage works similarly as if you were on your own.
Of course, you’ve got to provide documentation for each person. In terms of how much you can borrow, we assess Applicant A’s situation and Applicant B’s situation, and they’re combined. Then, we look to see what mortgage can be obtained with your joint income, credit commitments, and liabilities.
There are certain things to consider, such as the type of income you receive and the type of debt you may have. But generally, it’s the same as applying on your own
My partner is a First Time Buyer but I’m not. What are my options?
If one person is a First Time Buyer and one isn’t, it potentially changes the mortgage options available.
Some lenders will say that both of you have to be the First Time Buyers to obtain particular mortgage benefits. With other lenders, as long as one person is a First Time Buyer, you can still access their First Time Buyer range.
It’s down to how the individual lenders structure their mortgage products and whether they’ll consider you as first time buyers. Broadly speaking, it’s not something to worry about. We can explore the right options for you when the time comes.
Do both buyers have to be First Time Buyers? Do couples lose First Time Buyer status if one partner bought in the past?
No, both of you don’t have to be First Time Buyers. Again, that’s lender specific. However, there may be different levels of stamp duty payable if you have owned a property before.
There’s a difference between a mortgage lender’s rules about who can apply as a First Time Buyer, and the legal position regarding how much stamp duty you’ll need to pay and at what level.
Do I have to pay stamp duty if my partner is a First Time Buyer but I’m not?
Yes, if one person is a First Time Buyer and one isn’t, you would pay stamp duty at the prevailing rate based on the person who has owned property before. The conveyancers would confirm the Stamp Duty in relation to the purchase price. This is due to the legal status of one of you not being a First Time Buyer.
A First Time Buyer is defined as someone that’s never owned a property anywhere in the world, not just in the UK. So if one person is a First Time Buyer and one isn’t, you would not be treated as First Time Buyers from a stamp duty standpoint. However you may still be able to get a first time buyer mortgage
What does being joint tenants or tenants in common mean?
There are two main ways of property ownership in the United Kingdom, as you will see on the legal paperwork when buying a home.
The first and most common is joint tenants or joint tenancy, which means that you both 100% own the property. In the event that someone passes away, the full ownership of the property passes to the person who’s still alive.
With tenants in common, you can separate out percentages of ownership. So, person A might own 50% and person B owns 50%. In the event of Person A passing away with the property owned as tenants in common, that 50% share of the property would be passed on to the beneficiaries of their will, which may not include applicant B.
It’s all to do with survivorship and who inherits the property in the event that you pass away. But the most common is joint tenants, where you own it 100% jointly.
Choosing the right option is something to consult a solicitor about. But it’s important to understand this jargon – you’re 100% ‘jointly and severally’ liable. It means that regardless of whether it’s joint tenants or tenants in common, you’re both 100% responsible for the mortgage, whatever the legal status of ownership.
Can I get a mortgage with a guarantor?
Yes, you can apply for a mortgage with a guarantor. Different options are available from various lenders, but there’s a lot to consider.
Usually, a guarantor supports someone’s affordability. If you don’t have enough income to buy the home you want on your own, a guarantor can be there to help with affordability.
However, it does come with some downsides. There are pros and cons and trade-offs to be had.
A guarantor would ordinarily need to be a family member, although that’s not exclusively the case.
Understanding how a guarantor would affect a First Time Buyer is essential, but it’s also important for the guarantor to understand their obligations. For example, as a First Time Buyer with a guarantor, if you can’t make the mortgage payments, the guarantor needs to pay. They need to be financially stable enough and have enough disposable income to make those mortgage payments if you can’t.
If they don’t, it will affect both people’s credit scores and credit reports and can leave people in a sticky situation if they’ve not really explored what it all means at the outset.
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How much can you borrow as a First Time Buyer with a joint mortgage?
How much you can borrow as a First Time Buyer applying jointly will be based on your combined income. We look at how much you earn and what type of income it is – employed or self-employed. We also consider your joint outgoings such as your general cost of living and any debts you may have such as loans or credit cards – even down to student loans.
A lender assesses how much you can borrow based on that joint income. You typically hear that you can borrow multiples of four or five times your joint earnings, but what lenders actually do is establish affordability, taking into account your income, outgoings and any children you may or may not have.
That gives you a figure in terms of the maximum that you can borrow. As a rough approximation, you can generally get around 4.5 times your income, however, it’s really not that simple and won’t be accurate.
The right thing to do is seek advice from a broker. We’ll take account of your specific circumstances, your income and outgoings and give you a realistic figure of how much you can borrow on a mortgage.
How much deposit do I need?
As First Time Buyers, broadly speaking, you’ll always need at least a 5% deposit. There are a couple of schemes with lower deposit requirements; in some cases, you may not need a deposit. It’s very lender specific. However you should always aim for a minimum of 5% as a deposit.
The more deposit you have, the easier it is to get approved and the more competitive the rates may be. Once you know how much deposit you’ll have, we can establish your affordability to determine what your maximum purchase price could be, at which point you can start looking for properties.
What is a Joint Borrower Sole Proprietor mortgage?
We call a Joint Borrower Sole Proprietor mortgage a JBSP. It’s a type of mortgage where you have at least two people on the mortgage, but only one person owns the property.
To break it down, there are joint borrowers because two people are borrowing and we’re using two incomes for affordability, but it’s a sole proprietor, i.e., only one owner. Applicant A is going to be the sole proprietor. They will own the property, live in it and retain the mortgage.
The joint borrower, applicant B, is on that mortgage to support affordability but almost certainly won’t be living there. It’s a way of having a guarantor but not incurring any additional stamp duty charges.
Only one person is going to own the property – applicant A. If applicant B, is a parent or grandparent, they’re supporting affordability, but if they were to own the property there would be a big stamp duty implication. With JBSP they can help with affordability but not incur that stamp duty liability.
However, it’s really important to point out that the joint borrower would still be jointly and severally liable for the mortgage. They have to pay those mortgage payments if applicant A doesn’t. But they have no legal ownership of the property.
Because of that, the joint borrower has to seek independent legal advice to understand exactly what they’re signing up to and what that can mean for them.
Can you transfer a joint mortgage to one person?
Yes, you can transfer a joint mortgage to one person, as long as the person staying on the mortgage can evidence that they have enough income to support it.
Let’s say there are two people with a mortgage of £100,000. Each person earns £25,000.
If person A wants to move on for some reason, as long as person B’s income is sufficient to cover the full mortgage on their own, the couple could arrange a Transfer of Equity.
This is where you take someone off the mortgage and the property deeds, and one person remains on it. But just because someone thinks they could afford the mortgage, a lender won’t necessarily allow it. You would have to go through the affordability checks to ensure you can afford it on your own.
How do you calculate a First Time Buyer joint mortgage?
To calculate how much you can borrow as First Time Buyers buying jointly, we would sit down and go through what’s called a Fact Find. It’s essentially a questionnaire to gather information about who you are, your address history and whether you’re employed or self-employed.
We ask about your credit history and any credit commitments you may have. We take all the figures and plug them into our calculators to give us the maximum amount that you can borrow.
It’s far more involved than people might realise. People often have debts – paying for cars, credit cards, personal loans and student loans. We must consider all those factors when establishing how much you can borrow.
We also have to consider, as First Time Buyers buying together, how much you can actually afford to pay per month for your mortgage. Is it £500, £1,000, £1,500? At what level do you feel comfortable? That can also be a limiting factor.
If you don’t want to spend more than a certain amount per month on a mortgage payment, we factor that in to calculate the maximum you can borrow to stay within that budget.
How can a mortgage broker help me get a joint mortgage as a First Time Buyer?
It’s important to consider a few things. A mortgage broker can help you establish how much can be borrowed on a joint mortgage, and what’s affordable. This is really important. We certainly wouldn’t want you to buy a home with a mortgage you can’t afford
We’re always cautious in that respect because getting into a pickle with your mortgage can have catastrophic effects later down the line.
We also ensure that you understand the process, the responsibilities, the liabilities and what you’re getting into.
By understanding all the options available to you, you can make an informed decision before committing yourselves to buying a home. Because buying a home and taking out a mortgage is a big commitment that may last for 20, 30, or in some cases 40 years. We’re talking about hundreds of thousands of pounds.
So it’s really important that we get that right from the outset – and it’s also essential to choose a broker that you trust and feel comfortable with. We gather a lot of information and have some pretty serious conversations.
Buying a home is not as easy as it should be, perhaps, in the UK. So it’s about making sure we get you the right mortgage that meets your needs.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
