Getting a mortgage with friends

Can friends have a mortgage together? As we answer the question, let’s look at why you might want to go down that road and examine what’s likely to be involved.

According to a story in the Guardian newspaper on the 4th of January 2022 , there were significantly more successful first-time buyers in 2021 – the total of 303,000 representing a 35% increase over the previous year and double the numbers of first-time buyers in the years immediately following the financial crisis of 2008.

But if you are one of the remaining, still hopeful first-time buyers you might question such glowing statistics. You know that the picture’s not half so rosy. You know only too well what hard work it will be to get that first foot on the housing ladder – what with a big deposit still to save, a steady salary to maintain, and good credit reports to show for yourself.

It’s at times like that you ask yourself about the prospects of a mortgage with friends in the UK. After all, you’ve probably been sharing the rent you’re presently paying – so why not share a similar burden with those same friends before the proceeds go into any landlord’s pocket?


Feel Free to Contact Us

Call Damian
Email Us
Call Office

Can I get a mortgage with friends?

If you are serious about pursuing the idea of sharing a mortgage with friends, probably the first thing you will want to do is seek the advice of a mortgage professional – such as us here at NeedingAdvice.co.uk.

Sharing a mortgage with someone who is no more than a friend, who has a different job than you and earns a different income naturally comes with a range of complications. Throw in potentially different credit scores and these are complications likely to make the help and assistance of a mortgage professional more or less indispensable.


Why get a joint mortgage with friends?

Typically, you will be looking at a mortgage with friends because you need to borrow more than your own salary alone would allow you. To share the mortgage with a friend or friends, you will need what lenders call a joint mortgage.

For a joint mortgage, lenders will generally consider the incomes of two of the highest earners to assess the maximum amount of any mortgage advance – although a joint mortgage agreement might typically involve up to four mortgagees.

In a joint mortgage, the borrowers enter the agreement on equal terms – each of the signatories to the mortgage agreement is responsible for making the mortgage repayments and for meeting the fees relating to the mortgage advance. If one of the signatories subsequently defaults on those payments, the remaining signatory or signatories are automatically held responsible for making the payments in full.

Every individual named in the mortgage agreement – namely every signatory – must meet all of the lender’s borrowing criteria, including whatever affordability and creditworthiness tests are applied to each individual.

Subject to those criteria, the application process, the assessment of incomes, and stress tests on affordability are just the same for each applicant as in any individual mortgage application.

If you have any other questions, you can also contact a solicitor for legal advice.


Should we rent together before we get a friends’ mortgage?

Buying a home with the help of a mortgage is, clearly, a longer-term commitment. How can you be certain that your friendship will endure the full term of any mortgage you share together?

A good way of testing your relationship is to live as part of the same household for a reasonable period – say, at least six months – before taking the plunge and buying a home together. That arrangement may help you get used to each other’s differences and foibles. More importantly, perhaps, you will also learn whether your friends have the financial discipline that will be needed once you have the responsibilities of a mortgage.


What else do I need to consider before buying a house with friends?

The golden rule to remember is that a joint mortgage with a friend is a long-term financial commitment – for better or for worse, it creates a financial link between you and your friends.

You will want to avoid setting up this kind of financial commitment with a friend who has a poor credit history, for example, because that very fact could affect your own credit rating.

Whether you are used to doing so or not, if you contemplate entering into a mortgage agreement with a friend or two, financial transparency will be paramount. Each of you will need to check and share with the other that all-important credit score. Sensitive financial affairs can remain private, of course, but each party at least needs to know the other’s credit score.

Part of that financial transparency may extend to setting up a joint bank account for the payment of mortgage-related – and, potentially, other domestic – bills. You will need to agree in advance, for example, how ongoing household costs are to be shared between you.

For the avoidance of any doubt as to your intentions, it will be prudent to name in a Will the beneficiaries of your share in the home bought with your friends – subject to whether you are sharing that ownership as joint tenants or tenants in common.

You’ll also need to consider what happens if some years down the line, one of you wishes to buy their own place – so getting some kind of written, legal agreement in place as to what will happen in those circumstances may be sensible.

As has probably become quite evident – in view of these potential complications – you will almost certainly want to instruct the relevant professionals to act as your mortgage advisers on mortgage, legal, and tax matters.


Next Steps – Joint Mortgage with Friends

Despite the statistics you might read in some quarters, it is likely to prove an uphill challenge to buy your first home.

Sharing that challenge with a close friend or two might be a way of securing the mortgage you need.

Throughout the process of arranging any joint mortgage with friends, however, you may want to draw on the advice of the relevant professionals – such as ourselves here at NeedingAdvice.co.uk.


FAQs- Joint Mortgage with Friends

What is a joint mortgage?

A joint mortgage is where more than one person takes out a loan to purchase a property. The lender treats the borrowers collectively rather than individually. This means that the interest rate and repayment terms are agreed upon by all parties concerned. If you are interested in getting a joint mortgage with a sibling, you can contact a specialist mortgage broker.


How do joint mortgages work?

When you take out a joint mortgage, you make payments directly to the lender. Your friend(s) pay the same amount towards their portion of the mortgage. As a result, both people benefit from lower monthly repayments and a cheaper overall cost of borrowing. You can also read about joint ownership mortgage when one friend has a bad credit report.


Can I get a mortgage without my partner/friend?

Yes, you can. However, there are certain conditions that must be met before you can apply for a mortgage. These include:

• You have to be over 18 years old

• You cannot owe more than £2 million on any debt (including credit cards)

• You must have a good credit history

To understand further eligibility criteria as per your profile, you could speak to a mortgage adviser who can help you to find the best mortgage deal.


What happens if you have a joint mortgage and split up?

You need to remove your partner from the joint mortgage if you want to split your mortgage in half. This means that you will be responsible for paying off the house in full if he/she can’t pay back the loan. However, if you do this, you will also be responsible for any debts that were incurred before the split. You should get your money back when you’re paying off the mortgage, but you might need to sell the house if you own it as tenants in common.


What is the difference between a joint mortgage and a shared equity mortgage?

A shared equity mortgage is similar to a joint mortgage, except that the lender doesn’t treat the borrower’s contributions equally. Instead, they give each party 50% of the value of the property. In other words, you would only be liable for 25% of the total loan. When you split up, you will still be able to keep your share of the equity.

Read more about shared ownership on our blog.


How many friends can I buy with?

You can apply for a mortgage with 5-6 friends depending on certain circumstances. For Example, lenders that allow 4 people to borrow money are always careful about how much money they lend out. They always make sure that the income of 2 people is enough to cover the loan. The lender who allows 5 or 6 people to borrow money could also accept the mortgage application based on the income of 3 or 4 people with ease.  It’s always best to contact a mortgage broker before starting your application who can help you with the best mortgage deals as per the number of applicants.


Can I get a mortgage with three applicants?

Mortgage lenders are very strict about how many people can sign up for a loan. However, some lenders are flexible and would be happy to approve three or four applicants. Not all lenders require all applicants to provide proof of income. Some may ask for one statement out of these-

  • Accounts
  • Tax Returns
  • Bank Statements

The most important thing to remember is that you should always check whether you qualify for a particular type of mortgage. It is possible to get a home loan even if you don’t have a job yet. However, you could end up having to pay higher interest rates because of your lack of employment history. If you do decide to go ahead with a mortgage application, you should try to get pre-approval first so that you know exactly what you can afford.

If you are also interested in a shared ownership mortgage, don’t forget to read our article on our website blog.


What happens if one friend won’t able to pay the monthly mortgage payment?

In this case, the lender has two options: either let the person stay in the house until the loan is paid in full, or repossess the house. The mortgage lender usually wants to avoid repossession, so he will offer the borrower a new loan at a lower mortgage rate. If the borrower refuses to take the new loan, the lender will repossess the house instead.