How to Add Someone to an Existing Mortgage?

It’s not a surprise that in a world that moves at such a fast pace, we often find our lives changing in equal measures. Naturally, our circumstances will change over time and so there are a variety of reasons why you may end up asking “how can I add someone to my mortgage?”

From the advantages to the difficulties and everything in between, in this complete guide, we will take you through everything you need to know about adding someone to an existing mortgage. Let’s dive in:

Can I Add Another Person to My Mortgage?

The simple answer – Yes! You can absolutely add a person to a mortgage, however, there are aspects of this process that could prevent you from doing so. For example, lenders will always assess the financial situation of both you and whomever you wish to add to your mortgage. As such, ensuring that the person you would like to add meets both the affordability and credit criteria of that particular lender is crucial.

In addition, it is important to note a mortgage transfer to another person will ordinarily involve legal and administrative processes in order to be approved.

Why Might You Want to Add Someone to Your Mortgage?

It’s no secret – in today’s living, paying for a mortgage on your own can be an especially challenging task, especially if your income has changed or overheads within your house have changed. The cost of living crisis has caused prices to rise across the UK and households are seeing the costs escalating rapidly, from increased energy prices to paying more on the weekly shop – it’s fair to say that many are feeling the financial squeeze.

For some homeowners, a natural solution to these financially tight times is to add a person to a mortgage. This could be parents, siblings, or even a business partner, all to help manage with the rise of ongoing costs.

Beyond financial reasons, there may also be a direct motive with a change to your personal circumstances. You may have changed relationship status and wish to add your wife, husband, or partner to the mortgage.

Is Adding a Person to a Mortgage a Good Idea?

It’s true – adding someone to your mortgage can prove to be a practical solution for some situations, however, it’s important to consider the potential downsides of adding a person to your mortgage.

The most key issue involves the impact on your initial deposit. “Why?” Well, if you originally purchased your home on your own and later added someone to your mortgage – and the deeds reflect a joint tenancy – you both are entitled to an equal split of the property. Now, when you consider the initial deposit (typically 10% of the property’s value) that you have previously paid, you will lose that initial deposit in a joint tenancy agreement.

One alternative method to this is an equity transfer mortgage that would allow for an agreed upon percentage of ownership of the property. This could potentially equal out the finance of your initial deposit. However, it’s essential to always weigh both the short and long-term financial implications before proceeding to add a person to a mortgage.

How Do I Add Someone to My Mortgage?

There are two main ways to add another person to your mortgage:

1. Approach Your Existing Lender
2. Remortgage to Add Another Person

Which option you decide upon will wholly depend on your current circumstances and the mortgage lender’s policies. With that being said, let’s explore the options:

Approach the Existing Lender

The simplest way to add someone to a mortgage is to contact your existing lender and ask. In rare cases, lenders may approve the addition of a person(s) to a mortgage, though it should be noted that each lender will have different requirements for this process to be approved.

Unfortunately, approaching the existing lender directly is the exception. Generally speaking, lenders will prefer you to remortgage with the same lender rather than simply adding a person to your existing mortgage.

Remortgage to Add Another Person

Remortgaging is the most common way to add someone to a mortgage. Should you approach your existing lender, they will undertake the new application and assist with any questions you have along the way.

It’s always best to request a quote from your existing lender in conjunction with a trusted broker to explore additional remortgage offers that are available. This way, you can ensure that you will be finding the best deal available to you, potentially saving a sizable amount of money.

When Should You Remortgage?

If you’re considering how to remortgage your house, then the perfect question to follow would be “well, when should I remortgage?”

It’s important to consider any additional charges you may have to account. For example, if you’re remortgaging during your fixed term, you might find that you have an early repayment charge.  Unfortunately, early repayment charges can be both substantial or non-existent, depending entirely on your lender. In some cases, it might be best to wait. By waiting a few months, you could potentially save £10,000+ just through avoiding unnecessary penalty charges.

Association of Credit

Whenever you take out a financial agreement with someone else, a credit association will be added to your credit file. This means that lenders will be able to see exactly who you are financially linked to when assessing applications, including mortgages, credit score checks, and other financial loans.

Generally speaking, having an association of credit wouldn’t be an issue. However, should the person you’re linked to have a poor credit score or a history of struggling with loan repayments, then this could negatively impact your mortgages credit score. The reason for this is that lenders may view your finances as interconnected, viewing the additional person(s) finance as a representation or extension of your own financial ability (or inability) to repay credit.

What Type of Tenancies Are There When Adding a Person to a Mortgage?

We briefly touched upon this earlier in the article, however, deciding on the type of tenancy is, without doubt, one of the most important factors to consider when adding another person to a mortgage.

The bottom line – when someone is added to your mortgage, you are forfeiting your absolute right to your property. In short, how much control you retain will directly depend on the types of tenancy decided upon and recorded in the property deeds.

There are two main types of tenancy when looking to add a person to a mortgage, these include:

• Tenants in common
• Joint tenants

In most cases, solicitors will use the joint tenancy for joint mortgage arrangements, entitling both parties to equal shares – a 50/50 split of the property.

However, if you have financially contributed more to the purchase of the property through your initial deposit and existing mortgage payments, you may want to explore a tenants in a common arrangement.

For your convenience, we have outlined the specifics along with the advantages and disadvantages of each below:

Tenants in Common

If you’re wondering, “what are tenants in common?”, well, the short answer is as follows: tenants in common is a way of dividing a property ownership into unequal shares. For example, two people could be on one mortgage with one party holding 70% interest in the property, while the other party owns the remaining 30% of the property.

This type of arrangement is especially useful if you have been paying off the mortgage for several years and want to ensure that the new co-owner receives a smaller share of equity to justify those historical payments.

With that being said, there are some key tenants in common problems that you should consider. One key downside to this type of agreement is that it is easier for one party to force the sale of the property against the other party’s wishes. Simply, as the amount divided is unequal, it follows that the decision-making process will similarly be uneven and potentially unfair on the party with a lower percentage value.

Another problem that can arise is that, in a tenancy in common agreement, a party can sell their share of the property at any time. This could result in you owning a property with a stranger or less than ideal co-owner.

It should also be noted that in the scenario where a tenant in common passes away, their share will not automatically transfer back to you. Instead, they can leave their share to someone else – typically a family member or friend – in their will.

Joint Tenants

Due to the potential complications of a tenancy in common agreement, most solicitors will recommend a joint tenants agreement, especially in the case of a couple buying a home together.

With a joint tenancy agreement, both parties will have equal rights to the entire property. As such, if you were to separate in the future, the other person would not be able to sell their share individually. Instead, both parties would need to agree on a sale of the entire property, or, one would have to petition the court for the sale of the entire property.

The downside of a joint tenants agreement is that they only work in equal shares, and as such, you may lose out on any money that you have already invested into the property without them.

Fortunately, this isn’t necessarily a deal-breaker. You can always ask your solicitor to draft a deed of trust to protect your financial contributions.

Deed of Trust

A deed of trust – at its core – is to ensure fairness in property ownership. It outlines the rights and responsibilities of parties that are subject to the agreement.

In most cases, this would mean that you can have a deed of trust drawn up with specific stipulations that can be used to protect your financial contributions and interests. For example, this may include stipulations around your initial deposit or additional financial contributions and can state that a specific amount must be returned to one party in the event of a sale.

It is important that you discuss a deed of trust with both your solicitor and lender, as there may be additional costs and criteria’s that need to be met.

Can I Remove Someone from My Mortgage?

The desire to remove a name from a mortgage is, regrettably, as common – if not more so – than adding someone to a mortgage. It’s part of life; relationships can break down and people might find themselves financially trapped in agreements with ex-partners or friends that they no longer wish to be associated with.

In many cases, one person will decide to move out of the property, while the other wants to ‘buy out’ the other’s property share.

There are two main methods of removing someone from a mortgage, and they are almost identical to adding someone.

Firstly, approach your lender. You can ask your lender to remove someone from the mortgage. However, this is unlikely to succeed, as lenders are often reluctant to release someone from their financial commitments.

Secondly, the other option is to remortgage. However, this can pose a variety of potential problems, including:

• When you initially got the mortgage the affordability calculation, this calculation would have been completed with two people’s income. When you remortgage to remove someone, you will need to pass the affordability calculation on your own.
• You will need to have enough equity in the property to cover a ‘deposit’, as well as having enough funds in the loan to repay the party you’re removing from the property. All of which can lead to high additional costs.

How Boon Brokers Can Help You Add Someone to a Mortgage?

At Boon Brokers, we are a fee-free broker who offer impartial no-obligation mortgage advice. We are here to help you. And as a whole-of-market mortgage broker, we have access to a wide range of mortgage, insurance, and equity lenders and brokers.

If you’re considering the option to buy someone out of a mortgage or need assistance with adding someone from a mortgage – contact Boon Brokers today.