Buying a Property with Friends: What Mortgage Options Exist?

With the cost of living on the rise and everyday expenses increasing, saving for a deposit and preparing for future mortgage repayments has become one of the biggest hurdles when trying to buy a property. But what if you could share this burden with a friend…

Pooling your resources with friends or family could help you all get a foot on the property ladder. But joint ownership can be more complex than a standard mortgage arrangement, introducing a few more legal and financial complexities for you to keep in mind.

So, should you consider buying a property with friends?

In this article, we explore all the mortgage options available for friends and family buying together, the risks and legal protections you will need, and any government schemes that could help you bridge any gaps. Let’s jump in.

What Is a Joint Mortgage and How Does it Work?

A joint mortgage is a mortgage that is shared between multiple borrowers, each borrower being jointly liable for the mortgage repayment. While joint mortgages are typically shared between two people, many lenders will allow up to four borrowers on a joint mortgage application.

But how does a joint mortgages work in practice, I hear you ask?

In a joint mortgage application, each named borrower’s income, credit history, and debts will be assessed by your chosen lender. Crucially, all parties will be equally responsible for the full loan amount, regardless of who actually makes the payments.

In practice, this shared liability means that if one (or multiple) people cannot make the monthly repayments in the future, the other named borrowers will have to cover the difference to prevent the mortgage from going into default.

The main benefit of securing a joint mortgage with others is the chance to combine your incomes. Lenders will typically approve a much higher loan amount when multiple people apply for a mortgage together, which can greatly increase the group’s overall borrowing power and make a real difference to the types and available property possibilities.

What is a Joint Borrower Sole Proprietor Mortgage?

For those looking to secure a mortgage with the help of family (or a benefactor), a popular mortgage alternative would be a joint borrower sole proprietor mortgage (JBSP). This arrangement names the buyer as the sole legal owner of the property, while others are named on the mortgage and share legal responsibility for the debt.

For example, parents might choose to help their child get on the property ladder by becoming joint borrowers. Their income can be factored into the application, helping boost the borrowing power, but the parents don’t have any legal ownership of the property itself.

This type of mortgage can be particularly useful for helping a child onto the property ladder early in their career – especially if their current income falls short of affordability requirements but is expected to increase in the near future.

Understanding these different mortgage types can help ensure that you select the best option that matches your unique circumstances when buying or investing in property with a friend or family member.

At Boon Brokers, our dedicated mortgage advisers will provide you with fee-free, expert mortgage advice that is tailored to your situation. As a whole-of-market mortgage broker, we can access and compare deals from across the entire UK market, matching you with the most suitable mortgage deals that align with your needs.

Should Friends Use Tenants in Common or Joint Tenants in the UK?

When purchasing a property jointly, deciding between joint tenants or tenants in common is a crucial consideration and will determine how each buyer’s ownership rights are structured and distributed.

What is the difference between joint tenants and tenants in common?

The choice you make can have long-term legal and financial implications, so it’s crucial to understand the key differences and how each arrangement affects your ownership rights. Let’s break it down:

A Joint Tenancy Agreement Is:

• A legal arrangement that states all parties own the property equally.
• Each owner has equal rights to the whole property. This is regardless of how much each person contributed financially, including the initial deposit and subsequent mortgage repayments.
• In the scenario that one owner passes away, their share will automatically transfers to the remaining owner(s). This is known as the “right of survivorship”.
• Joint tenants cannot pass on their share through a will.

A joint tenancy agreement is the most common mortgage choice for couples or close family members who plan to treat the property as a shared asset, regardless of individual contributions.

A crucial consideration to note with a joint tenancy is that each owner will have an equal share in the property. While this arrangement is rather standard for married or committed couples, it can be less suitable for friends – particularly when each buyer is contributing different amounts financially.

A Tenants in Common Agreement Is:

• A legally binding contract that states each party owns a specific share of the property. The shares can be divided equal or tailored to reflect how much each person has individually invested.
• Each buyer will have the option to sell or pass on their share of equity through a will or to another party.
• There is no automatic “right of survivorship”. This means that should one owner die, their share will form part of their estate.

A tenant in common agreement provides a legal contract that allows each co-owner to hold different proportions of the property, reflecting their financial contributions. As such, this option is ideal for friends or business partners who want to clearly define their share and protect their individual investments.

By legally defining your individual ownership upfront, this can help avoid relationship strains or financial confusion in the future, potentially saving a lot of time and money should any influencing factors occur further down the line.

At Boon Brokers, we understand how important it is to get these details right from the start. Our expert advisers can guide you through the entire mortgage process, from helping set up the correct legal agreements to matching you with the mortgage deal that suits your needs.

Are There Group or Multi-Borrower Mortgages?

Yes, multi-borrower – or ‘multi-applicant’ – mortgages are designed specifically for situations where more than two people are applying together.

But, how many people can be on a mortgage?

Many lenders will offer mortgage products specifically for applicants of two or more borrowers to be on a single mortgage. Generally, most lenders will allow up to four people to be on a single mortgage.

Similarly to a joint mortgage, group or multi-borrower mortgages help increase borrowing capacity by combining incomes and sharing repayment responsibilities. They’re useful when multiple friends or family members want to purchase a property together, particularly if the property value or deposit requirements are high.

If joint mortgages or multi-borrower mortgages have made it onto your radar, then you’re probably exploring the idea of buying with friends or family. While both mortgage options share some similarities, there are a few important distinctions you need to know. Here’s a quick breakdown of the key differences between the two:

Which Lenders Offer Mortgages for Friends or Groups?

Most lenders offer mortgage products that support joint or group applications between friends and family. Each lender has its own application criteria, including deposit requirements, income thresholds, and credit checks.

However, some lenders are more flexible than others when it comes to assessing multiple applicants who aren’t related or in a relationship. Keep in mind that certain high-street lenders may also limit the number of applicants or require legal agreements that clearly outline ownership shares.

Working with a trusted and regulated mortgage broker can help you gain access to a detailed overview of joint mortgage lenders and details on which banks offer joint borrower sole proprietor mortgage products suitable for friends buying together.

At Boon Brokers, our expert advisers provide whole-of-market access, meaning we’re not tied to any one lender. We will search the whole mortgage market to ensure that we match you with mortgage providers who are comfortable with group or friend-based applications, and guide you through the entire process.

What Legal Steps Should Friends Take Before Buying Property Together?

Before you commit to buying a property with friends, it’s vital to make sure that you protect your financial interests through the correct legal documentation. In the context of securing a joint mortgage with friends, it is particularly important to secure a deed of trust.

What is a deed of trust, and why is it important?

A deed of trust is a legal record of each buyer’s share of ownership and financial contribution. Specifically, it outlines the details of what will happen if one party wants to sell their share or if any disagreements arise, ensuring transparency and fairness in negotiations.

In short: Securing a deed of trust can help protect your financial investment in a property.

Understanding your joint mortgage legal rights and obtaining a deed of trust will help prevent financial disputes. Without these protections, you risk losing your rightful share or facing complications if a co-owner cannot or does not meet their obligations.

Do You Need a Co-Ownership Agreement When Buying with Friends in the UK?

While a co-ownership agreement is not legally required when buying property jointly in the UK, it is strongly recommended. This agreement works complementary alongside the deed of trust, and helps to outline the financial arrangements of the practical day-to-day. For example, a co-ownership agreement might cover:

• How bills are shared.
• How maintenance is handled.
• What happens if one party wants to exit the arrangement

As this agreement sets out how responsibilities and costs will be divided, having a clear co-ownership agreement in place can help prevent any misunderstandings, protect everyone’s interests.

What Government Schemes Can Help Friends Buy Together?

Researching government schemes that support buying a property with friends can help reduce upfront costs and improve affordability. Here’s a summary of the main affordable home ownership schemes in the UK that may assist joint buyers:

Where Can I Find a Mortgage Broker for Joint or Group Buyers?

Shifting through the world of joint mortgages can be complex. Whether you’re buying a property with friends, family members, or a partner, it’s essential to understand both the lender’s criteria and the legal implications of your financial decision.

But don’t worry – Boon Brokers is here to help you.

At Boon Brokers, we specialise in delivering fee-free, expert advice on joint mortgages and complex group buying scenarios. Our dedicated mortgage advisers will take the time to understand your unique situation, helping you and your friends or family find the mortgage deal that matches your financial needs.

With whole-of-market access, it doesn’t matter whether you’re applying with two people or a group, our dedicated mortgage advisers can find you the best mortgage deals that are on the market today.

By choosing Boon Brokers, you benefit from:

• Personalised mortgage advice tailored to group buyer
• A fee-free, transparent service with no hidden costs
• Access to exclusive lender deals and whole-of-market comparisons
• Support navigating the legal and financial complexities of joint ownership

Contact Boon Brokers today to speak with a dedicated mortgage adviser who can help you secure your home with confidence. With our expert guidance, buying a property with friends has never been easier or more straightforward.