Category: Mortgages

Unencumbered Mortgages – Remortgage a House You Own

by Kristian DerrickPosted on

If you own a property outright and want to secure a mortgage, the process is usually straightforward.

The risk to the lender is considered low, so it’s typically easier to secure a remortgage on an unencumbered property than it is to secure a mortgage to buy a new property.

Although, even though an unencumbered mortgage is usually very easy to secure, it shouldn’t be something you rush into. Similar to a normal mortgage, it’s a financial commitment.

If you are certain you want to pursue an unencumbered mortgage, it’s a wise idea to look for the best deals (which Mortgageable can help you with).

What is an unencumbered mortgage?

Put simply, unencumbered is a word that is used for a property that is mortgage-free. Any outstanding loans and charges have been cleared on the property.

If you have paid off your mortgage or if you paid cash for your home, then your property is now unencumbered.

There are many reasons why people would want to remortgage on an unencumbered property.

Some may wish to buy another property, others may want to renovate their current home, or make a considerable purchase in the form of a car. Some people even remortgage to consolidate any other outstanding debt they may have.

Unencumbered mortgage lenders

If you own your property outright, then you will likely have some very good deals available to you. Yet, it’s important to bear in mind that some lenders will consider it a new mortgage rather than a remortgage.

This doesn’t really have much of an impact, but it’s still important to familiarise yourself with the process.

In practice, the term ‘remortgage’ is defined as replacing an existing mortgage with a new one. As your home is mortgage-free, a true ‘remortgage’ is not actually available. Ultimately, the process is very similar, which is why many lenders refer to it as a remortgage.

Since you have paid off your mortgage in full and now own your property outright many lenders will view you as low risk. As a result, you should face minimal barriers to securing an unencumbered mortgageable and the team at Mortgageable will be more than happy to assist you.

Raising capital from a mortgage free property 

Those who own their property outright are in a much stronger position from a lender’s perspective as you have no outstanding debt left to pay on that property.

However, just like with any other mortgage, the reasons for wanting to remortgage and your individual circumstances will determine the likelihood of your acceptance for a mortgage.

Related reading: 

You might wish to consider the following when deciding whether or not you want to remortgage on a property you already own outright:

  • Why are you applying for the mortgage?

This might be for a number of reasons. Perhaps you wish to purchase a larger home or even consider a buy to let.

Home improvements, holidays, new cars, paying off debt are all popular reasons however, it is worth noting that your reason must make financial sense.

  • Can you afford it?

You own your property outright. Do you really want to enter into a new financial commitment? Can you afford the monthly repayments?

These are the types of questions you can expect a lender to ask you when determining your affordability got the new mortgage, so it is worth considering the answers to these questions before you apply.

If you already have a lot of debt then remortgaging an encumbered property might not be the best thing to do however, this will depend on your individual circumstances.

There are other options available if you need to release some capital to pay off other debts. Contact one of our advisors if you are in this position to discuss a debt consolidation mortgage.

  • Can you take the risk?

With every mortgage comes risk. If you have already paid off your mortgage you own your property outright then you are in a very secure position.

Taking out a new mortgage will increase your risk. Even if you are financially stable, it is worth remembering that if you do not keep up your monthly repayments then you may lose your home due to repossession.

Need more help? Check our quick help guides: 

Apply for a mortgage on an unencumbered property today

I own my property outright, can I remortgage?

A mortgage you take out on a property you own is not much different from a normal mortgage. That means lenders will be carrying out a thorough analysis on all the usual criteria including your income, affordability, loan to value (LTV ratio), and take into account any debts.

Other factors can also have an influence including the purpose of the remortgage and your age. There are many different factors that can come into play, but if you would like to find out exactly what you can expect, feel free to contact one of our advisors for a no-obligation chat.

Can I remortgage a property I have inherited?

Difficulties may take the form of family members or estate restrictions and charges that you were otherwise unaware of. There is the matter of transferred ownership that has to be considered.

This can be a lengthy process, but your solicitor will represent you during the process and advise you of what you have to do within the regulations of the law.

Sometimes, when people inherit a property, they want to remortgage to release some capital however this is not always simple due to the fact that most lenders will want you to have owned the property for at least 6 months before submitting your remortgage application.

We have access to many specialist lenders who deal with inherited property remortgages. Contact one of our advisors today to discuss your options.

Can I remortgage for investment?

There are many investors who buy decrepit properties for cash then make the necessary repairs and refurbishments before putting the property on the rental market.

These investors usually buy the property with cash. The reason being, some properties are considered non-mortgageable due to a state of disrepair.

Cash purchases also tend to go through the process much quicker than a mortgage. Through renovation or refurbishment, the investors are increasing the value of the property and can then opt to remortgage if they wish to release funds for their next venture.

If you purchase the property with cash, then it is deemed unencumbered. However, if you want to move into the property yourself,  or if you wish to rent it out to others, then remortgaging may be a better option for you.

You can contact one of our expert advisors for professional advice.

Unencumbered mortgage with bad credit

If you have experienced difficulty in the past obtaining credit due to a poor financial history, then it may be challenging to obtain a mortgage although having adverse credit does limit the number of lenders available to you, there are specialist lenders on the market who can help.

The age of your credit issues will have a major impact on your level of acceptance. For example, if your credit issues occurred more than six years ago and your financial conduct since then has been excellent, then you should be eligible for a competitive deal from the lenders.

The type of issue you faced will also have an impact on your eligibility for acceptance, and or a good deal. For example, if you have a default or late payment recorded on your credit file, whilst this will have a negative impact on your application, it is less severe than a notice of bankruptcy on your record.

Our advisers are available to help you with any questions you may have about your credit score. Contact us to find out how to maximise your chances of obtaining an encumbered mortgage even with adverse credit.

How can I better my chance of qualifying for an unencumbered mortgage?

If you apply for a mortgage on an unencumbered property, lenders will carry out the same assessments and checks as they would if you were applying for any other mortgage. Factors such as income, affordability, other debts, and loan to value will all be assessed.

Lenders will also consider the reasons behind your application at this point. If, for example, you are remortgaging for a buy to let, then lenders will also consider this in their evaluation.

The list of factors that may have an impact on the deals you will be eligible for is ongoing, however, some of the most common are, employment status, age, credit rating, and other debts.

Related guides: 

Contact us to find out more about unencumbered mortgages

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account. That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable mortgage.

Self-Build Mortgages – How much can you borrow?

by Kristian DerrickPosted on

More and more people are deciding to build their own homes, both to save money and to create a unique living space that is perfectly tailored to them.

Before you get swept up in the planning of your perfect kitchen or dream bathroom, you need to know how your self-build will be financed.

Whether you will be doing most of the work yourself or will be putting the project in the hands of a surveyor and architect, etc., you need to be aware that you won’t be able to get a standard residential mortgage.

What are Self-build Mortgages?

To finance the build of your own property you may need a specialist loan, known as a self-build mortgage.

This niche loan is designed to help those building their own homes, by releasing funds in stages, as opposed to one lump sum once the property is completed.

This article will take you through everything you need to know about the self-build mortgage, so you can be fully aware of any issues that may affect you.

Need more help? Check our quick help guides: 

What are the Funding Stages of a Self-Build Mortgage?

Whilst it may vary between project and from lender to lender, there are usually five stages during the entire process where funding will be released. They are as follows:

  1. The purchase of a suitable plot of land.
  2. The completion of the foundations and footings.
  3. Completion of the walls up to roof level (eaves height).
  4. Weatherproof and watertight roof completed.
  5. The completion of the interior to habitable condition and the final fixes.

By releasing funding for the self-build in stages, planning for the costs of each stage can be done in the knowledge of knowing how much money will come through, and when. The money can then be paid to the necessary contractors, architects, etc. in a timely manner as the work is ongoing.

Find a self-build mortgage

Types of Self-build Mortgages

There are two types of self-build mortgages, which primarily differ on when the money is released at each stage in the building process:

Arrears Self-build Mortgage

With an arrears self-build mortgage, the funds are released when each stage of the process is completed and a valuer has assessed the construction. This type of mortgage is suited to those who have a lump sum of their own money to invest into the build.

To be eligible for this type of self-build mortgage, loan providers will usually expect you to be able to pay for the first 20% of the project yourself.

Advance Self-build Mortgage

With an advance self-build mortgage, the funds are released at the beginning of each stage of construction. This option is better for those who don’t have a significant amount of their own cash to get the building project off the ground. The money will be in your bank in advance and therefore available to pay for labour and materials when it is needed.

Related guides: 

Advantages and Disadvantages of Self-build Mortgages

There are a number of advantages and disadvantages to a self-build mortgage, which should be carefully considered before deciding whether to go ahead with your application.

Some of the advantages that come with a self-build mortgage include:

  • You get to create your dream home, from the foundations to the finishing touches. Everything can be tailored to your own specifications and decorated to your own personal taste.
  • Usually, it works out significantly cheaper to build your own home than it is to buy the equivalent property that has already been built.
  • You can save thousands of pounds in Stamp Duty as you only pay if the price of your plot of land exceeds the threshold for stamp duty (not including building costs).
  • You could make a large profit if you sell your self-build and they tend to be worth significantly more than they cost to construct.

As with any type of mortgage, self-build mortgages come with a number of disadvantages that should be weighed up with the potential advantages. They include:

  • The interest rates tend to be higher than those for standard residential mortgages and you are likely to need a larger deposit too.
  • There is a lot more paperwork that needs to be handled than with standard mortgage – not only will you need all the usual paperwork, but you will need the likes of building plans, cost projections, etc.
  • There is a lot of planning involved and you will need to keep close track of your finances throughout the process otherwise you spending may exceed the funding from your self-build mortgage.
  • The potential cost of alternative accommodation, whilst your new property is being constructed.
  • There is always the possibility of unforeseen extra costs and there could be time delays.

How Much Can I Borrow?

The amount of money you are eligible to borrow will inevitably vary from lender to lender, being based on their own affordability and eligibility criteria and your personal & financial information.

The majority of mortgage providers will loan you up to 4x your annual income, some will go up to 5x income, and even a few may go up to 6x your income in certain circumstances. Some lenders will also take into account the likes of bonuses, overtime, and commission, etc.

A self-build mortgage provider will complete an affordability assessment by looking at your income and current financial commitments and determining the amount of free income you have for mortgage repayments.

Find a self-build mortgage

How Much Deposit Do I Need?

As self-build mortgages fall under the category of a niche loan, lenders may require a large deposit to offset the risk that comes with borrowing for a property that is not completed.

Whilst the amount of deposit will vary from lender to lender, generally speaking, the amount you will be eligible to borrow is between 60% to 80%  Loan to Value (LTV).

If you have no deposit at all, you would find it difficult to even be approved for a standard residential mortgage, never mind a self-build mortgage. However, there may be a lender out there that will offer a 100% LTV self-build mortgage, but they are highly likely to require some other form of security to act as a deposit.

This other form of security can be the land you are planning to build on if you already own it. There are some lenders that will allow you to use a percentage of the land’s value as a deposit, but the percentage required as collateral will vary from lender to lender.

Whatever deposit you have, get in touch with a mortgage advisor that has access to the whole market to discuss your situation further and find the best self-build mortgage deals for you.

Self Build Mortgage

What Documentation do I Need for a Self-build Mortgage

For a self-build mortgage, you will need all the usual documentation that you need for a standard residential mortgage, such as identification, proof of income, bank statements, etc. Additional documents you may require include:

  • A copy of planning permission.
  • Copy of the estimate of the total cost of the project.
  • Copy of the building regulations approval.
  • Construction drawings and specifications.
  • Site insurance and structural warranty.
  • If required, your architect’s professional indemnity cover.

Self –Build Mortgage Interest Rates

The rates of interest for a self-build mortgages, tend to be higher than the standard residential mortgage. The amount of time you are locked into a deal will also vary between providers.

Once your new build has been certified as habitable by an RICS qualified surveyor and has been issued a Building Control Completion Certificate.

Related reading: 

Can I get a Self-build Mortgage with Bad Credit?

Bad credit or no credit history can certainly be an issue with some providers of self-build mortgages. The amount a mortgage provider will be willing to loan you will very much depend on the type of bad credit, whether it has been resolved, and how long ago it was registered on your file.

The less severe the credit issue and the longer ago it was registered the better. Furthermore, if a lender does accept you for a mortgage with bad credit or no credit history, you are likely to require a larger deposit and may have to pay a higher interest rate.

There are lenders that specialise in mortgages for individuals and businesses with bad credit. A mortgage advisor with access to the whole market will be able to determine which lenders will consider your eligibility and hopefully find you a good deal.

Contact us today to see how we can help you secure a self-build mortgage. Alternatively, you can call on 03330 90 60 30 to speak to an advisor.

Residential Self Build Mortgages UK

Kristian Derrick
by Kristian DerrickPosted on

More and more people are deciding to build their own homes, both to save money and to create a unique living space that is perfectly tailored to them.

Before you get swept up in the planning of your perfect kitchen or dream bathroom, you need to know how your self-build will be financed.

Whether you will be doing most of the work yourself or will be putting the project in the hands of a surveyor and architect, etc., you need to be aware that you won’t be able to get a standard residential mortgage.

What are Self-build Mortgages?

To finance the build of your property you may need a specialist loan, known as a self-build mortgage.

This niche loan is designed to help those building their own homes, by releasing funds in stages, as opposed to one lump sum once the property is completed.

This article will take you through everything you need to know about the self-build mortgage, so you can be fully aware of any issues that may affect you.

Need more help? Check our quick help guides: 

What are the Funding Stages of a Self-Build Mortgage?

Whilst it may vary between projects and from lender to lender, there are usually five stages during the entire process where funding will be released. They are as follows:

  1. The purchase of a suitable plot of land.
  2. The completion of the foundations and footings.
  3. Completion of the walls up to roof level (eaves height).
  4. Weatherproof and watertight roof completed.
  5. The completion of the interior to habitable condition and the final fixes.

By releasing funding for the self-build in stages, planning for the costs of each stage can be done in the knowledge of knowing how much money will come through, and when.

The money can then be paid to the necessary contractors, architects, etc. in a timely manner as the work is ongoing.

Find a self-build mortgage

Types of Self-build Mortgages

There are two types of self-build mortgages, which primarily differ on when the money is released at each stage in the building process:

Arrears Self-build Mortgage

With an arrears self-build mortgage, the funds are released when each stage of the process is completed and a valuer has assessed the construction.

This type of mortgage is suited to those who have a lump sum of their own money to invest in the building.

To be eligible for this type of self-build mortgage, loan providers will usually expect you to be able to pay for the first 20% of the project yourself.

Advance Self-build Mortgage

With an advanced self-build mortgage, the funds are released at the beginning of each stage of construction.

This option is better for those who don’t have a significant amount of their own cash to get the building project off the ground.

The money will be in your bank in advance and therefore available to pay for labour and materials when it is needed.

Related guides: 

Advantages and Disadvantages of Self-build Mortgages

There are a number of advantages and disadvantages to a self-build mortgage, which should be carefully considered before deciding whether to go ahead with your application.

Some of the advantages that come with a self-build mortgage include:

  • You get to create your dream home, from the foundations to the finishing touches. Everything can be tailored to your own specifications and decorated to your own personal taste.
  • Usually, it works out significantly cheaper to build your own home than it is to buy the equivalent property that has already been built.
  • You can save thousands of pounds in Stamp Duty as you only pay if the price of your plot of land exceeds the threshold for stamp duty (not including building costs).
  • You could make a large profit if you sell your self-build and they tend to be worth significantly more than they cost to construct.

As with any type of mortgage, self-build mortgages come with a number of disadvantages that should be weighed up with the potential advantages.

They include:

  • The interest rates tend to be higher than those for standard residential mortgages and you are likely to need a larger deposit too.
  • There is a lot more paperwork that needs to be handled than with a standard mortgage – not only will you need all the usual paperwork, but you will need the likes of building plans, cost projections, etc.
  • There is a lot of planning involved and you will need to keep close track of your finances throughout the process otherwise your spending may exceed the funding from your self-build mortgage.
  • The potential cost of alternative accommodation, whilst your new property is being constructed.
  • There is always the possibility of unforeseen extra costs and there could be time delays.

How Much Can I Borrow?

The amount of money you are eligible to borrow will inevitably vary from lender to lender, being based on their own affordability and eligibility criteria and your personal & financial information.

The majority of mortgage providers will loan you up to 4x your annual income, some will go up to 5x your income, and even a few may go up to 6x your income in certain circumstances.

Some lenders will also take into account the likes of bonuses, overtime, commission, etc.

A self-build mortgage provider will complete an affordability assessment by looking at your income and current financial commitments and determining the amount of free income you have for mortgage repayments.

Find a self-build mortgage

How Much Deposit Do I Need?

As self-build mortgages fall under the category of a niche loan, lenders may require a large deposit to offset the risk that comes with borrowing for a property that is not completed.

Whilst the amount of deposit will vary from lender to lender, generally speaking, the amount you will be eligible to borrow is between 60% to 80%  Loan to Value (LTV).

If you have no deposit at all, you would find it difficult to even be approved for a standard residential mortgage, never mind a self-build mortgage. However, there may be a lender out there that will offer a 100% LTV self-build mortgage, but they are highly likely to require some other form of security to act as a deposit.

This other form of security can be the land you are planning to build on if you already own it. Some lenders will allow you to use a percentage of the land’s value as a deposit, but the percentage required as collateral will vary from lender to lender.

Whatever deposit you have, get in touch with a mortgage advisor who has access to the whole market to discuss your situation further and find the best self-build mortgage deals for you.

Self Build Mortgage

What Documentation Do I Need for a Self-build Mortgage

For a self-build mortgage, you will need all the usual documentation that you need for a standard residential mortgage, such as identification, proof of income, bank statements, etc. Additional documents you may require include:

  • A copy of planning permission.
  • Copy of the estimate of the total cost of the project.
  • Copy of the building regulations approval.
  • Construction drawings and specifications.
  • Site insurance and structural warranty.
  • If required, your architect’s professional indemnity cover.

Self –Build Mortgage Interest Rates

The rates of interest for a self-build mortgage, tend to be higher than the standard residential mortgage. The amount of time you are locked into a deal will also vary between providers.

Once your new build has been certified as habitable by an RICS-qualified surveyor and has been issued a Building Control Completion Certificate.

Related reading: 

Can I get a Self-build Mortgage with Bad Credit?

Bad credit or no credit history can certainly be an issue with some providers of self-build mortgages.

The amount a mortgage provider will be willing to loan you will very much depend on the type of bad credit, whether it has been resolved, and how long ago it was registered on your file.

The less severe the credit issue and the longer ago it was registered the better.

Furthermore, if a lender does accept you for a mortgage with bad credit or no credit history, you are likely to require a larger deposit and may have to pay a higher interest rate.

There are lenders that specialise in mortgages for individuals and businesses with bad credit.

A mortgage advisor with access to the whole market will be able to determine which lenders will consider your eligibility and hopefully find you a good deal.

Contact us today to see how we can help you secure a self-build mortgage. Alternatively, you can call on 03330 90 60 30 to speak to an advisor.

How to get a mortgage on a fixed term contract

by Kristian DerrickPosted on

If you’re a temporary worker or on a fixed-term contract, you may assume that you aren’t eligible for a mortgage. 

In actual fact, even if your income varies due to a temporary contract you can still be accepted for a mortgage.

There are a number of specialists – and in some cases even mainstream lenders that offer mortgages to people on temporary contracts.

If you have been employed in your current line of work for over a year, and haven’t had prolonged periods of unemployment, you have a good chance of having your mortgage application approved.

In this guide, we will discuss potential routes to securing a mortgage on a fixed-term contract, which may be applicable to the following scenarios:

  • Getting a mortgage on a temporary contract.
  • Mortgages for temporary workers.
  • Mortgages for fixed-term contracts.
  • Mortgages for zero-hour contracts.

How Can you Get a Mortgage on a Fixed Term Contract?

It is certainly true that if you are a temporary worker it can be more complicated to get a mortgage than those in permanent positions.

Before any provider will consider you for a mortgage, they will need to see comprehensive evidence that you can make monthly repayments for the duration of your loan.

Therefore, you will need to prove that you will have a regular income, which can be difficult on a temporary or fixed-term contract, as your earnings can fluctuate or even stop between jobs.

This makes you a higher risk lender than those that have a guaranteed regular income. However, here are some temporary contracts that lenders view more positively than others.

Need more help? Check our quick help guides: 

For example, those with in-demand professions, such as doctors and substitute teachers, on ‘zero hours’ contracts working when needed, are usually offered mortgages, particularly if they can prove they have been in their profession long-term.

On the other hand, if you are a seasonal worker, you are much less likely to be considered for a mortgage as your contact is short term.

It is always worth speaking to an experienced mortgage advisor about your situation as lenders treat all mortgages individually and will take a number of factors into account before making a decision.

A mortgage advisor has access to the whole market and will be able to find you a selection of lenders that consider or specialise in temporary contract mortgages and help you secure a mortgage on a fixed-term contract.

Find a mortgage for a temporary contract

Getting a Mortgage As A Temporary Worker

Whether you are in a probationary period or on a temporary contract, there are a number of lenders out there that will consider you for a mortgage.

Even as a temporary worker, you can still fit the affordability criteria for a mortgage, as long as you have been in your role for a significant amount of time.

Even if your circumstances are different, such as your contract has just started, you still may be eligible, depending on how closely you fit a mortgage provider’s lending criteria.

Eligibility Criteria For Fixed Term Contract Mortgages

As a temporary contract does not provide the guaranteed income that lenders prefer, the eligibility criteria for a mortgage may be stricter to offset the extra risk. Here is an overview of the criteria a lender will consider for a temporary contract mortgage:

Time in Your Current Role or Agency

Although the criteria will vary between providers, lenders will have a minimum requirement for the length of time you have been in your current role. Whilst many lenders will require a minimum of 12 months, others may require less, or even have no minimum at all as long as you have been working for the same company in other positions.

For agency workers applying for a mortgage, lenders will usually require you to be employed with the same agency for at least 12 months. However, there may be some specialist lenders that will consider your application if you have been working in the same role with a different agency for 12 months.

Related guides: 

Length of Current Contract

Those with short-term contracts may find it difficult to secure a mortgage from mainstream lenders, as there is a larger risk attached to loans for those without guaranteed long-term employment.

Lenders will want to know the time left required on your current contract before they consider you for a mortgage. This will vary between lenders between 3 and 12 months.

Regular renewals of your contract will encourage lenders, making them more likely to consider you if you have only a few months left on your current contract.

Additionally, written confirmation of a renewal of your contract would encourage lenders to consider you even if there are zero months left in your current position.

Breaks in Employment

Breaks in employment can cause a problem for lenders as they will want to know that you have a reliable and consistent income to cover the monthly mortgage payments.

You may be ineligible with some loan providers if you have had an employment gap in the last 12 months. However, other lenders may have less strict restrictions, as long as you have a sustainable income.

Furthermore, the definition of what constitutes a gap in employment may vary between lenders. Some may consider just a single week to be a break in employment that can affect your mortgage options. Other lenders may accept a gap of 4 weeks between contracts, as long as there is an acceptable explanation.

Whilst a long run of regular employment is more desirable to mortgage providers, it is not impossible to get a mortgage with breaks in your employment history.

Get in touch with a mortgage advisor that has access to the whole market. They will be able to match your circumstances to the eligibility requirements of mortgage providers.

Find a mortgage for a temporary contract

Quick help mortgage guides: 

How Much can Temporary Workers Borrow?

If you have a good employment history, with no gaps and a contract that still has a long term to go, there is a very good chance that you can secure a 95% mortgage and up to 5x your income. However, if there are gaps between your contracts, you may need a larger deposit.

Related reading: 

Improving your Chances of Securing a Mortgage as an Agency or Temporary Worker Mortgage

If you are a temporary worker, there are a number of things you can do to improve your chances of getting a mortgage offer. They include:

  • Prove Your Income – Provide payslips for the past year, as well as two previous P60 forms or tax returns.
  • Show Stability – Showing a lender that you have been in the same line of temporary work for over 12 months will greatly boost your chances of being accepted.
  • Provide Bank Statements – This will show lenders your earnings and outgoings, which can be used to determine if you have the necessary disposable income for mortgage payments.
  • Improve your Credit Score – You can do this in a number of different ways, such as paying down the balance of any credit cards, make bill payments on time, and don’t apply for multiple mortgages without talking to an advisor to avoid multiple enquiries.
  • Collect as Much a Deposit as Possible – A bigger deposit can really help improve your chances of getting a mortgage as a lender considers this as a lower risk. Generally speaking, the bigger the deposit, the lower the risk.

Mortgage on a Fixed-Term Contract Main Takeaways:

  • Fixed contract and agency workers can secure a mortgage.
  • Lenders will look more favourably on temporary workers with no gaps in their employment history and guaranteed work in the future.
  • Mortgage providers will have tighter eligibility criteria for those in temporary employment.
  • Speak to a mortgage advisor before going applying for a mortgage to learn more about your options.

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Further reading: 

How do joint mortgages work? (Sharing a Mortgage)

by Kristian DerrickPosted on

When more than one (usually up to four) join together to purchase a property they will apply for a joint mortgage.

Each person named on the mortgage are jointly responsible for making the monthly repayments, but not each person has to have the same about of equity.

Furthermore, each person named on the joint mortgage, must sign all the relevant documents, provide information on their income, etc and meet with solicitors.

Who can get a Joint Mortgage?

Many lenders will allow up to four people to buy a property together, and you may hold more than one joint mortgage at any one time.

Take a look at some of the other common situations for a joint mortgage:

  • Common in the likes of London where property prices are higher, groups of friends band together to buy a property to avoid excesses rental costs.
  • A family member or friend joins forces with you, as an investment, or to help you get on the property ladder. This is often known as a guarantor mortgage.
  • Buying a property with a business partner with the goal of putting the property up for rent or to living in it.

How does a Joint Mortgage Work?

As previously mentioned, all those named on a joint mortgage will share responsibility for making the loan repayments.

This means that if one person named on the mortgage stops making the payments, the mortgage company may pursue you to make up the shortfall.

Furthermore, if you want to make changes to your deal, such as borrowing more money or changing the type of mortgage deal, it will have to be agreed on by all parties.

There are two types of joint mortgage:

Tenants in Common

This allows all those named on the mortgage can own legally different shares of the property – equity does not have to be shared equally.

For example, you could have 70% equity in the property and your co-owner could have 30%. Additionally, can leave their share to someone other than their co-owner in their will.

Tenants in common are usually used when family members, friends or business partners join together to purchase a property. A solicitor can draw up a legal document, known as a ‘Deed of Trust’ that details the percentage of the property that each person on the mortgage owns.

Need more help? Check our quick help guides: 

Joint Tenants

Usually used by long-term couples, in a joint tenancy each person on the mortgage jointly owns the entire property, therefore having equal rights in the property.

Therefore, if one borrower dies, the other(s) would inherit their share in the property, even if it has been left to someone else in their will.

If the property is sold, each owner would get an equal share of the proceeds and any profits. Furthermore, if joint tenants are looking to remortgage, they will need to do so together – they cannot get a mortgage separately.

Quick help mortgage guides: 

Can I get a Joint Mortgage with my Parents?

If you have been having difficulties in securing a mortgage on your own, you may be considering asking for your parent’s help.

Having a joint mortgage with parents often increases your chances of being accepted, as the risk has been significantly reduced. Only parents that are financially stable and can afford the repayments should the earnings of their child be interrupted should take on this extra financial responsibility.

Furthermore, parents considering applying for a joint mortgage with their child should be aware that if they already own a property they may have to pay an additional 3% Stamp Duty charge when purchasing the new property.

There may also be a capital gains tax to pay when it comes to selling the property. There are other schemes available with some lenders.

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Can I get another Mortgage if I already have a Joint Mortgage?

Yes, you may be able to get an additional joint mortgage if you already have one with an ex-partner or business partner, etc. As with any other joint mortgage, it will be subject to you meeting a lender’s affordability and eligibility requirements. With an additional joint mortgage, you may be restricted to the amount you can borrow, as a lender will determine the monthly payment you will be able to make, based on your financial information and personal circumstances.

How Much can be Borrowed on a Joint Mortgage?

How much you can borrow on a joint mortgage will be calculated differently between lenders. Each will have an affordability calculator that will determine the amount you are eligible to borrow, based on the income and outgoings of all persons on the mortgage.

However, the amount you are eligible to borrow will be reduced if you are looking for a joint mortgage and only have one income as non-earners will be classed as dependents.

Find a joint mortgage

Additionally, different lenders may consider other sources of income very differently when calculating the amount you are eligible to borrow.

One hundred percent of the likes of bonuses, overtime, investment income may be considered by one lender, whilst only 50% may be taken into consideration by another. Some lenders may also take into considerations certain benefits, such as Child Tax Credits.

To know more about what lenders will take into account in their affordability calculators, get in touch with a mortgage broker that has access to the whole market. In a fraction of the time, it would take you on your own, a broker can find out what you will be eligible to borrow with dozens of lenders.

How do Joint Mortgages differ to Standard Mortgages?

Generally speaking, joint mortgages have the same rates and fees as a standard single person mortgage. However, with more than one person on a mortgage, savings can be combined to make a bigger deposit, which may give you access to better deals.

Typically, mortgages get cheaper the bigger the deposit. The best mortgage rates tend to be offered to those with a 40% or more deposit. Therefore, pooling savings to reduce your loan-to-value ratio by just 5% can result in savings of thousands of pounds over the term of your mortgage.

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Is a Joint Mortgage Right for Me?

Whether a joint mortgage is right for you is completely dependent on your circumstances, and there is a lot to consider, including the likes of:

  • Whether you are married or in a common-law relationship.
  • If you want to purchase a buy to let in just one name for tax purposes.
  • If one of the borrowers has a bad credit history or is not working
  • If you are looking to buy a better home and two incomes will help you achieve that or you want to borrow as much money as possible.
  • If you and a group of friends cannot afford to purchase a home on your own, but want to get on a property ladder.

There are so many variables to consider, when it comes to deciding between joint and individual mortgages, so get in touch with a mortgage broker or expert for some impartial advice.

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Getting out of a Joint Mortgage

You can get out of a joint mortgage, but it is not always straightforward. The main two options are selling the property and splitting the proceeds or buying out the other owner.

The Impact of a Joint Mortgage on your Credit

If you have a joint mortgage and are thinking about borrowing more money in the future, you will be subject to credit checks, and the following may show on your credit record:

  • A financial association with others on your joint mortgage. If they have bad credit it could make lenders question your ability to make loan repayments.
  • Any money you borrow will show up on your credit report and the amount of personal debt you have may influence what lenders believe you can afford to borrow.
  • Any missed or late payments on your mortgage, even if they are not your fault, will show up on your credit report, which may affect your ability to borrow in the future.

Contact us today to begin your joint mortgage application.

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