Getting a Mortgage with 3 or 4 People

With UK inflation rates reportedly continuing to rise, the cost of living crisis is worsening and is making mortgages a much harder milestone for many people to reach. At the same time, the property market remains resilient, only adding further pressure to affordability challenges.

In such times, it is not uncommon for us to be asked “How many people can be put on a single mortgage application?” One common misconception is that only two people can be placed on a mortgage – but that’s not true!

In this article, we explore exactly how many people can be added to a mortgage, what the advantages of a multi-person mortgage are, and precisely what steps you need to take to secure one. Let’s dive in.

What Do Lenders Class as a Multi-Person Mortgage?

There are hundreds of mortgage lenders across the UK, with lots of them offering a wide variety of mortgage products. And so, while the misconception of only being allowed two people on a single mortgage may be false, there are mortgages available that will only allow up to two applicants.

Fortunately, each lender will naturally have different rules – or mortgage lending criteria – for their specific mortgage products, with some specialist lenders allowing up to four applicants on one mortgage. As such, it is possible to apply for a mortgage with up to 4 people in total.

When looking for multi-person mortgages, it can be challenging to find a lender that will allow for multiple applications on one mortgage. Using a trusted whole-of-market broker – like Boon Brokers – can help ease your search and quicken your application. With years of experience, our expert mortgage advisers understand the requirements from mortgage lenders, and, most importantly, which lenders are likely to accept multi-person mortgages.

How Many People Can Be Named on a Mortgage?

The short answer: up to four people can be named on a single mortgage, depending on the product. However, as we’ve touched on before, different lenders will have different criterias, and as such, the number of applicants can be restricted.

On the other hand, a multi-person mortgage does not mean you have to have four people on a single mortgage. Rather, a multi-person mortgage application simply offers the opportunity – a three people mortgage application could also be approved.

When applying for a multi-person mortgage, all applicants will have to provide details about their financial situation. Should the mortgage application be approved, the joint names on the mortgage will be equally liable for payments. As such, if one or more named members cannot make payments, you could be held responsible for the full amount – not just your percentage.

This is a crucial factor to consider when looking at multi-person mortgages. For, if the mortgage goes into a default, or there are problems with repayments, a lender is within their rights to pursue you alone for the outstanding amount.

Who is Eligible for a Multi-Person Mortgage?

To be eligible for a multi-person mortgage, every person on the mortgage application will need to pass the usual affordability checks. These include:

• Evidence of income
• Credit scoring
• Affordability checks

Similarly, like a standard mortgage, a multi-person mortgage will require a deposit. Some lenders may have strict criteria when it comes to deposits on multi-person mortgages, and may request a minimum of 15% of the property’s value.

As a good rule of thumb, setting aside 10% of the property’s value is a great place to start. Working with a broker – like Boon Brokers – can help you identify the best mortgage product for you and help answer the question “Am I eligible for a mortgage?” specific to you.

Evidence of Income

If you’re looking to secure a mortgage in the UK, you will need to provide evidence of your income.

For those who are employed, this can be achieved by submitting PAYE slips. For those who are self-employed, proof of income can be completed through tax calculations and tax year overviews.

Multi-person mortgage applications can prove to be slightly tricky when it comes to providing proof of income, as lenders will need to see evidence of income from all applicants. If you are applying for a multi-person mortgage with your parents, and they are retired, lenders will require evidence of their pension income instead.

On this note, age can be a very important factor to consider with multi-person mortgages, as lenders will always look at the oldest applicant to decide on the mortgage term. As such, applying for multi-person mortgages with older friends or family could result in a shorter mortgage term in order to meet the lender’s criteria.

Credit Scoring

There is another misconception about multi-person mortgages and credit scoring. This misconception is that should you have adverse credit (a poor credit score), then you can get a mortgage with someone who has a good credit score. This is false.

In reality, each applicant on a multi-person mortgage will need to pass the lender’s credit scoring requirements.

If you’re concerned about your personal credit score, then it’s a good idea to sign up for a credit scoring service to help identify where you can improve. Check My File is a great option, as they will help collate information from the four major credit reference agencies, allowing you to see your scores side by side.

It is important to note that lenders will typically only use one reference agency when it comes to identifying your credit score. For example, one lender might use Equifax, while another might use TransUnion. As such, it’s best practice to check your credit across a variety of credit agencies.

Improving your credit score before applying for any mortgage type can be highly beneficial. However, if you’re looking for a joint mortgage with bad credit, then speaking to a mortgage broker could help identify specific lenders with more flexible criteria.

Affordability

Perhaps the most important part of any mortgage application is the mortgage affordability. For a multi-person mortgage, this can help significantly as there are more people to spread the affordability across.

This is a simplified illustration. In practice, lenders assess combined income and expenditure rather than splitting the required borrowing evenly between applicants. Now, if this was spread across 3 people, the calculation and affordability check becomes £60,000 each for equal shares. And finally, with four people, the calculation and affordability costs further reduce to £45,000 each, for equal shares.

At this point, it simply becomes a number game. In short: the more people you can spread the affordability cost across, the individual affordability burden will be lower.

How Much Can You Borrow?

Typically, lenders will assess your combined income, credit histories, and overall deposit amount when calculating how much you can borrow for a multi-person mortgage. It is important to note that different lenders will have their own criteria and affordability calculations, and so borrowing limits may vary from lender to lender.

If you’re unsure how much you will be able to borrow, using a mortgage affordability calculator is a great place to start. In addition, speaking with your mortgage broker can also help identify how much specific lenders are likely to lend.

The Benefits of a Multi-Person Mortgage

As we touched on early, the main benefit of a multi-person mortgage is the improved affordability.

Affordability on a multi-person mortgage reflects the phrase “many hands make light work”, for when mortgage costs are spread across multiple applicants, it becomes easier to pass the lender’s affordability checks. This can be particularly helpful if you’re struggling to qualify for a standard mortgage loan.

In short, a multi-person mortgage can help ease the financial strain and can make homeownership a more accessible and achievable option. In addition to this, there are a few other benefits to multi-person mortgages, including:

• With increased financial affordability, you may be able to borrow more than you would on your own.
• Expenses such as stamp duty, legal fees, and survey costs could be divided among applicants, reducing the individual financial burden.
• With multiple incomes contributing, saving for a deposit and securing a mortgage can be a quicker process than if you were applying for a standard mortgage alone.

A multi-person mortgage can help make property ownership more achievable in the current market.

The Drawbacks of a Multi-Person Mortgage

It is important to note that there can be a few drawbacks to a multi-person mortgage, including:

• Age restrictions
• Credit scoring problems
• Demonstrating income
• Liability in the event of default

Let’s explore these drawbacks in detail

Age Restrictions

Many people looking to apply for a multi-person mortgage will be looking to include their parents on the application. Unfortunately, lenders will most likely have a maximum age limit for their products that could lead to:

• The applicant exceeds the lender’s maximum age limit
• The term is restricted (reduced) due to the age of an applicant

For most lenders, the minimum age for a mortgage is 18 and the maximum age limit for a mortgage will be 70, though some lenders may extend this to 75.

When a mortgage application is approved, the term length will be based on the oldest applicant with the loan being paid back in full before they reach the age restriction (maximum age for a mortgage).

By way of example, if you applied for a multi-person mortgage with a parent of 64 years old, then most lenders would limit the term to around 5 – 6 years.

On the other hand, a younger couple might be able to secure a 35-year term, significantly reducing their monthly payments.

While shorter mortgage terms will result in higher monthly repayments, they can also offer a financial advantage with a lower overall interest cost. Due to the shorter repayment period, you would have to pay back less interest than would accrue over time.

If you’re unsure about mortgage term lengths or age restrictions, your broker will be able to provide a side-by-side comparison of shorter and longer term mortgages, finding the best mortgage option for you.

This is something you should consider when applying for any joint mortgage product as you will have a responsibility to the lender for that money regardless of any other applicant’s obligation or financial circumstances.

Credit Scoring and Demonstrating Income

As touched upon earlier in this article, a multi-person mortgage increases the likelihood that one applicant may have adverse credit.

This is simply because the more people that are applying for a mortgage increases the likelihood that one of the applicants may have a bad credit score/history.

Additionally, verifying multiple incomes can also be tricky, especially in the case of an applicant who is either retired or will be retired during the mortgage term agreement.

This is mainly because pension incomes can be in many different pots, and the applicant would need to source all the information for the lender to verify their overall income.

If your parent is retiring during the term of a joint mortgage, they will need to show their pension income is sufficient to pass the affordability check.

Liability in the Event of Default

It is vital to understand that the bank has no obligation to chase all parties equally for debt. As such, if you are consistently making payments while another named applicant cannot, or is missing payments, you can be liable to pay the shortfall.

Joint mortgage liability is something that you must consider when applying for a multi-person mortgage. The reality is that you will have the responsibility to the lender for the money borrowed, regardless of other named applicants’ obligations or financial circumstances.

Alternative Types of Multi-Person Mortgages

There are a variety of mortgage products on the market today, with alternative options available for those wishing to apply for a mortgage with additional people. Exploring the different mortgage types can help provide you with a holistic view on what is available, and perhaps most suitable for your specific situation. Consider:

Family Offset Mortgages

If you’re struggling to build a sizeable deposit, a Family Offset Mortgage may be a great alternative option for you.

With a Family Offset Mortgage, you can contribute a deposit while a family member adds additional funds to that deposit, which is then held in a linked account. Essentially this will reduce the mortgage balance and potentially which can reduce the interest charged on your mortgage balance.

Standard Joint Mortgage

A Standard Joint Mortgage allows for multiple people to share ownership of a property, and is the most popular mortgage type for couples.

In a Joint Mortgage, both applicants are equally responsible for repayments and have equal ownership rights. An alternative to this would be a tenants in common agreement that can allow for a specific percentage split.

Joint Borrower Sole Proprietor Mortgages

Opting for a Joint Borrower Sole Proprietor Mortgage (BJSP) has many advantages, but is ideal for situations where family members or friends are helping with payments without wanting a share in ownership of the property.

With a BJSP, you can have multiple people (up to 4 people) making payments with only one named applicant on the property deeds. As such, BJSPs are mostly used by first-time buyers who struggle to meet the affordability requirements set out by lenders.

Get Matched With a Specialist Mortgage Broker

Here at Boon Brokers, we are a trusted whole-of-market mortgage broker, and we understand that finding the right mortgage can be difficult. Fortunately, our expert mortgage adviser can help you navigate the world of mortgages and find a mortgage match, whatever your financial situation – completely fee-free.

Whether you’re considering a multi-person mortgage or exploring other options, Contact Boon Brokers today for a specialist who can guide you through the mortgage process and secure the best deal for you.

It’s important to remember that your home may be repossessed if you do not keep up repayments on your mortgage.