Multi Person Mortgage

Podcast approved by The Openwork Partnership on 28/10/2024

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

Effectively, it’s where more than one person is applying for a mortgage. It could be two, three, four or even more than that.

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

Most lenders cap a mortgage at two applicants, so a multi-person mortgage is for more than two people. Generally lenders that are happy to lend to more than two will allow up to four. We’ve helped clients where there have been three and four people on the mortgage.

In terms of how it differs from a joint mortgage, there are lots of different ways it could be structured. You could have two people on the deeds of the property, but three on the mortgage, for example – whereas a joint mortgage is just two people on the mortgage and both are on the deeds.

There’s lots of pros and cons to this, which obviously we would go through with our clients individually.

Who can get a multiple applicants mortgage? Who is eligible for one of these?

Anyone could apply for a multi-person mortgage, providing you fit within the bank’s criteria. While joint mortgages are very common, not all banks offer mortgages for more than two people.

So if you’re looking for a mortgage for three or four, you will potentially be more limited. But the qualifying criteria is very much the same. You could potentially get one of these mortgages as a First Time Buyer or a previous homeowner. The bank’s typical criteria would still apply.

You can’t have a mortgage, generally speaking, beyond the age of 75 or 80. You need an income or employment, for most of the applicants at least. These are the normal qualifying criteria – there isn’t necessarily specific criteria for multi-person mortgages. It’s just that there’s limited options and fewer lenders allow you to do this.

How do multi-applicant mortgages differ from standard mortgages?

The most obvious way that they differ is that you could potentially use more incomes with multiple applicants on a mortgage. That’s one of the reasons someone might have a mortgage with three or four people on it.

In theory, you could have mum, dad, and two children all on a mortgage using all of their incomes to support affordability. That would allow them to get a bigger mortgage than they would on their own – subject to lots of affordability rules.

That’s the main difference from a standard joint mortgage, where you’ve normally got two people and you’re using two incomes.

Again, there are different ways it could be structured. You could look at a Joint Borrower Sole Proprietor mortgage, which has more people on the mortgage than actually own the property. It’s a way to add someone to the mortgage with you to help you borrow more.

What types of properties can you get a multi-person mortgage on?

Most types of properties are available and again, normal qualifying criteria apply with the banks. You could certainly buy flats and houses of standard construction, typically. If it’s more quirky construction, we might have to dig a bit deeper to find lenders that offer multi-person mortgages.

It won’t only be specific properties that these banks will lend on. They’ll cover normal houses, apartments and flats.

How is ownership split on a multi person mortgage?

That is ultimately up to you, and something that a solicitor would be able to give you advice and guidance on.

Check with the bank you’re applying with or your broker that they’re clear on what the ownership split will be. Will it be that all people on the mortgage will own the property jointly? Will there be a specific share that they own?

Will you just split it three ways or four ways? Or will just one or two people on the application own it? Your decisions will restrict you in terms of the lenders available to you.

How much can you borrow for a multi-applicant mortgage?

There’s no special formula or hard and fast rule, but the great thing about having more people on a mortgage is that potentially you could use their income in the application. Probably one of the most common approaches is to bring mum and dad on board.

Adding them to the mortgage means you could use their income to support the application. You’ve got three or four incomes to get the borrowing you need. A lot of banks will probably lend anything between four and five times your total income, so based on three or four incomes rather than two, it’s a much bigger total.

One thing to note is that if you bring someone on board and they own their own home with their own bills to pay, the lender will take that into consideration. Any costs for their own property will be included in affordability calculations.

But on most occasions, it’s better if you’re using additional income. It may get you the borrowing you need.

What are the benefits of a multi-applicant mortgage?

The benefit of a multi-applicant mortgage is the support of someone else. Most commonly a parent could come onto the mortgage with you to boost the mortgage borrowing. It will potentially help you get a bigger house or a house in an area you want it to be in.

Just to be really clear, not every bank that allows up to four people on an application will take all four incomes. That’s something that catches a lot of people out. You could apply for a mortgage with your parents and partner, but actually the bank will only use two of the incomes. That’s one of the risks or one drawback – especially if you don’t get advice.

A benefit could be that you could have the support of someone on a mortgage that doesn’t necessarily need to be on the deeds of the property. There could be tax advantages there, like stamp duty, for example.

If you’re a First Time Buyer and the only person on the deeds, it will probably be lower on the stamp duty side. That’s something a solicitor could guide you on.

Another drawback is that if the person coming on the mortgage with you is older, maximum age rules apply to the eldest applicant. You might be limited on how long you could take the mortgage for – if the oldest applicant is 50 years old on the mortgage you might be limited to 19-20 or years. Meanwhile someone aged 30 might be able to borrow over 35 or even 40 years.

So there are some risks, but again it depends on your circumstances and priorities. Our job as your advisor would be to pull out the information we need and present some options to you.

Are there any alternative options to a multi-applicant mortgage?

Yes – as Neezam mentioned, there’s the Joint Borrower Sole Proprietor mortgage.

You might want to apply for a four person mortgage where all four applicants own the property. Typically, we might see four friends buying a property and have a share each.

But Joint Borrower Sole Proprietor is specifically for parents to support a child – and vice versa – to buy a property. The benefit is that the son or daughter might buy the property, mum and dad will be named on the application but they aren’t owners, which could help with stamp duty.

The other alternative is actually just to get a normal mortgage. Sometimes a couple or single buyer might think they need another person on board to get the borrowing they need.

But actually when looking at the numbers, they don’t. So it’s really important to get that advice first and understand what the right mortgage is for you. A multi person mortgage does limit your options.

What else do we need to know about a multi-person mortgage?

I think we’ve pointed out the benefits of doing this, the options and the restrictions. Most banks and building societies will cap the number of people on a mortgage at two.

So with more than two people for a mortgage, you’re limited to a smaller pool of lenders. Then you’ve got all of the added criteria, affordability and competition on the deals to consider.

As always, an advisor that understands that area of the market and has the experience of helping with these types of applications is invaluable. It will save you a lot of time. You’ll get to fully understand all of your options from the lenders available.

You’re a lot less likely to get caught out or waste time with the wrong lenders that aren’t going to help with what you need. So if you want to save time, money and keep your hair, if you still have any, I’d say speak to a mortgage broker.

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Approved by The Openwork Partnership on 28/10/2024