Can multiple people apply for a mortgage?

When applying for a mortgage, the higher your income, the better. But did you know that this income can be split between multiple people?

We all know about couples applying for a mortgage together, but did you know that some mortgage providers will accept applications from up to four applicants?

They’re commonly used by family members or friends to help boost the deposit and income and make the application more attractive to lenders.

Imagine if you only had to save a quarter of an average deposit? Or if you saved a full deposit by yourself but then this amount was multiplied by four?

It then becomes easier to understand why some people choose to band together to make their home ownership dreams a reality.

Here are some of the things you need to know about applying for a mortgage with up to four people.

Why would you want multiple people on a mortgage application?

The simplest reason that people might band together to get a mortgage is to make their application more attractive. One person with a modest income and savings might struggle to get a mortgage. If they apply with two friends or family members, the monthly earnings and deposit will be much bigger. This can help low earners onto the property ladder, or help a group afford a more valuable property.

What is a joint borrower sole proprietor mortgage?

In some cases, the additional applicants aren’t planning to live in the same house. This is known as a joint borrower sole proprietor (JBSP) mortgage. In this case, an applicant with low income or a small deposit is supported by a friend or family member.

With a JBSP, the friend or family member’s income is used to determine eligibility, but their name is not added to the property’s title deed. This means that they are a non-legal owner, and would not be entitled to any gain in the property, either from rental yield or an increase in property value. Instead, they could only take out of the property what they have put in.

What is the maximum number of people for a mortgage application?

This will vary depending on the lender. All lenders will consider applications from two people, either a married couple, an unmarried couple or a pair of friends looking to purchase a property together. Some lenders will accept applications from three or four individuals.

At the moment, there are no lenders that will accept applications from more than four people. Most lenders will only accept applications from four applicants where there is a family tie.

It’s important to remember that every lender is different, so it’s worth speaking to a specialist mortgage broker as they will be able to put you in contact with the right lenders for your situation.

How do we calculate the income?

When applying for a mortgage as a sole applicant or as a couple, you might find lenders willing to offer up to 5 or 6 times your annual income. However, when there are three or more borrowers on the application, this will usually be capped at around 2 to 3 times the annual income.

For example, if you were to apply on your own, and you earn £25,000 per year, you might be able to secure a mortgage that is 6 times your annual income, or £150,000.

For three people, with individual incomes of £18,000, £25,000 and £27,000 (£70,000 total) this would be capped at three times the annual income, or £210,000.

While many lenders will accept applications from four applicants, very few will accept the income from all four applicants.

How do we split ownership?

There are two main ways you can split ownership. If you all agree to have equal shares in the property, you would be known as joint tenants. You would essentially be one legal entity and everyone would have their name on the lease.

If you want to have pre-determined shares in the property, you would be known as tenants in common. A legal document known as a Deed of Trust would need to be prepared. This will outline each person’s percentage of ownership.

If you decide to sell the property, all parties would need to agree on this. In the former instance, the proceeds would be split evening between all owners. In the latter instance, you would be entitled to your percentage share.

Next steps…

If you’re interested in securing a mortgage with three or four applicants, get in touch with our friendly team. We have in-depth knowledge of lenders and their individual requirements. So you can be sure you are on the right track with your mortgage application.

If you have any further questions about mortgages for multiple people, get in touch with our team today who will be more than happy to assist with your questions.

How to get a mortgage if you’re struggling

Getting rejected for a mortgage can be very distressing. Every lender has their own hoops you need to jump through, and sometimes you might fall short of their key requirements.

It’s important to remember that being rejected by one lender doesn’t mean that you will be rejected by all lenders. If you’ve recently been rejected for a mortgage, consider if any of the following situations apply to you.

I have a poor credit score
My income is low
I only have a small deposit
I moved to the UK less than three years ago
I’m self-employed

Read on to discover how you can work around these common problems and finally get on the property ladder.

My credit score is holding me back

Your credit score is usually the first thing that mortgage providers will consider. Your credit score can differ depending on the credit scoring agency.

There are three main credit scoring agencies in the UK. They are Equifax, Experian and Call Credit. Your chosen lender might look at one, two or all three of them to asses the strength of your application.

A credit score helps lenders to understand your past relationship with money and borrowing. They can see things like your total amount of debt, missed credit card payments, utility bill arrears and even adverse credit history like CCJs. They can also check that your address history matches the information you provide.

If you have a poor credit score, this can impact your chances of being accepted for a mortgage. Before making an application to another lender, check your credit score with all available agencies.

Make sure the following details are correct and up-to-date.

Your name and address
Electoral roll details
Your current accounts
Closed accounts
Satisfied CCJs are removed if 6 years have passed.

If there are mistakes on your credit report, this can impact your ability to secure credit.

The following steps will help to improve your credit score.

Keep your details up-to-date.
Make sure you never use more than 50% of your total credit limit.
Avoid too many hard credit searches in a short space of time. This usually means waiting at least 90 days after every failed credit application.

When your credit score is improved, you can try applying for a mortgage again.

My income is low

Mortgage providers make their lending decisions based on affordability. If they have concerns that you won’t be able to afford the repayments on your existing wage, then they may reject your application.

Lenders also consider things like future affordability. If you lost your job and it took a few months to find a new one, would you be financially stable enough to keep up with payments? Or if interest rates increase, will the higher payments make your loan unaffordable?

Padding your income or being overly optimistic with your expenses is another warning sign to lenders.

A help-to-buy scheme might be more suited to your situation. You should also look at shared ownership as a way onto the property ladder.

I only have a small deposit

A mortgage lending decision is based entirely on risk. This is why house hunters with a big deposit are seen as more attractive. The large deposit helps to reduce the risk for the lender.

If you think you have been rejected because your deposit is too small, there are a few steps you can take.

Look for a lower valued property. This will mean that your loan to value is higher.
Save more money to increase your deposit value.
Look for a help-to-buy scheme that could boost the value of your deposit.
Use a shared ownership scheme to get on the property ladder with a smaller deposit.

I moved to the UK less than three years ago

One of the things that lenders look for is a history of ties to the UK. If you moved to the UK less than three years ago, you may struggle to secure a mortgage.

When filling in a mortgage application, you will often be asked for your address history for the past three years. If any of these addresses are outside the UK, you may struggle to secure a mortgage.

In many cases, you may simply need to wait until you have a history and evidence of living in the UK for more than three years before making your application.

Some lenders will be more inclined to accept applications from those with less history in the UK. Only by working with a specialist broker can you get access to these lenders.

I’m self-employed

The self-employed often struggle to prove their earnings and convince mortgage providers that they are a safe bet. Unlike a monthly salaried job, freelance work is considered to be high risk. Your earnings might fluctuate, so you could struggle to make the payments.

If you are self-employed, you will typically need to provide two-year’s of accounts as evidence of your earnings. Lenders might take an average of your last two year’s earnings, or they could look at the most recent tax year as evidence of future earning potential.

Being self-employed doesn’t have to mean the end of your mortgage journey. While some high street lenders might be reluctant to give you a mortgage, an increasing number of specialist lenders see the benefits of self-employed workers.

As the self-employed sector is growing, the mortgage industry is taking a little longer to catch up. By working with a specialist mortgage broker, you’ll be able to navigate the mortgage process with ease.

If you’re ready to make your homeowner dreams a reality, get in touch with Niche Mortgage Info to find out how we can help you get a mortgage if you’re struggling.

Can you have a guarantor on a mortgage?

A guarantor mortgage can help you to get on the property ladder with no deposit, adverse credit history or low income. They aren’t always called guarantor mortgages. You might see them referred to as a family mortgage or even a springboard mortgage.

They work by allowing the mortgage applicant to name an additional person as a kind of “back up” on their mortgage application. This person will have to be a homeowner. Parents will often do this for their children in order to help them buy their first home.

If you are unable to keep up with the mortgage repayments, then the obligation would fall on your guarantor. If they are unable to keep up with the payments, you could both lose your homes.

What does a guarantor have to do?

They will have to be a homeowner and be willing to vouch for you. This means putting their own home up as collateral against your mortgage and your future mortgage payments.

They won’t be listed on the deed and they do not own a share of your property. Instead, they will have to sign a legal document agreeing to make your mortgage payments if you fall behind.

They will usually be asked to offer a security deposit, usually in the form of their own home or their savings. A lender might ask them to put a lump sum into a savings account owned by the lender. They will be unable to touch this money for a set period of time, usually until the borrower has paid off an agreed amount of the mortgage.

Do I need a guarantor?

If you have been turned down for a mortgage, you might want to consider applying with a guarantor. Lenders are more likely to accept your application if you have a guarantor on your side. If any of the following apply to you, you should consider a guarantor.

You can’t afford to save a deposit
You only have a small deposit (less than 5% of the property value)
You are a first-time buyer
You are on a low income
You want to borrow more than lenders think you can afford
You have an adverse credit history

Who can I ask to be my guarantor?

When choosing your guarantor, it’s important to think carefully about who to ask. Most lenders will accept a family member or even a friend to be your guarantor, provided they meet the criteria and are willing. However, some lenders will only accept applications with a guarantor who is your parent, grandparent or step-parent.

If the relationship breaks down, there is no way to end the agreement. The guarantor has to feel confident in the lender’s ability to continue making payments. However, they should also be comfortable making the payments for them if required. It’s not a good idea to be a guarantor for someone if you can’t really afford to make the payments.

What requirements are there for the guarantor?

The most important thing is that your guarantor needs to fully understand what they are agreeing to and what their obligations are. Their own home could be at risk if the borrower fails to keep up with their payments. Your guarantor will need to...

Own their own property outright, or have enough equity in it to be able to meet the lender’s threshold. In most cases, the guarantor will need to own at least 30% of their property. This means that a new homeowner is unlikely to be eligible.
Have enough income to cover their own expenses, plus the additional mortgage payments if required. It’s important not to stretch your income just to meet the lender’s requirements.
Have a good credit history. A poor credit history could be a sign to banks that your chosen guarantor might struggle to make the mortgage repayments. Therefore they will look for someone with a good history of repaying debts on time.

Next steps…

If you’re ready to start thinking about your options for a guarantor mortgage, it’s always best to seek the advice of a specialist mortgage broker. Our team can help you to navigate the guarantor mortgage process with ease. Get in touch today to find out if you need a guarantor, or if another mortgage type might be more suitable for your circumstances.

Can a self-employed person get a mortgage?

Before the financial crash of 2008 and the subsequent Mortgage Market Review, it was a lot easier for the self-employed to secure a mortgage. Self-employed individuals could use something known as a self-certification system to let lenders know how much they earned.

They could simply state their self-employed earnings and lenders would believe them without asking for proof. Unfortunately, this led to some people inflating their earnings in order to borrow more money.

Abuse of this system was one of the reasons for the credit crunch, which is why this type of mortgage was outlawed following the Mortgage Market Review. It’s still possible to get a mortgage while self-employed, but it is certainly more difficult than it was in the past.

What is a self-employed mortgage?

There is no such thing as a self-employed mortgage. Once you have passed the checks for a mortgage, you will have access to the same products and services as any other borrower. What is different about the lending process for the self-employed is how you prove your income.

When you are self-employed, you are responsible for your own taxes. When you submit your tax return, you will be given a SA302 form. This outlines your income for the tax period and is used by mortgage providers to determine affordability.

How do I prove my income?

Those in full-time employment have a fairly easy ride when it comes to proving their income. They simply need to show three month's worth of pay slips. The self-employed can sometimes be asked to share three year’s worth of accounts. This all depends on the individual lender.

Some lenders are more comfortable working with the self-employed and will ask for just one or two year’s worth of accounts. Some will even allow you to submit just 9 months of accounts if you have an accountant.

You can also provide evidence of earnings through things like work contracts or supplier contracts. For example, if you are a builder, showing that you have future work in the pipeline can help to bolster your application.

What else do I need to do?

Just like any other mortgage application, you will also need to ensure your credit score is strong. Show that you are responsible with money and try to avoid getting any CCJs. Staying within 50% of your total credit limit every month can also help to strengthen your case.

If you can save a larger deposit, this can also help your application. There are two ways you can do this. You can either wait longer before submitting your application and save money in the meantime. Or you can look for a property with a lower value. By choosing a lower value property, you might be compromising on certain aspects, but it can reduce the amount of loan to value you are applying for.

What if I am rejected?

If you are rejected by one lender, don’t despair! All lenders are different and it doesn't mean you cannot secure a mortgage. Get in touch with our specialist brokers to find out which lenders are best suited to your circumstances and how to boost your chances of securing a mortgage while self-employed.

How to get a mortgage if you are an older borrower

Unfortunately, as we get older, it becomes more difficult to secure a mortgage. Older borrowers know the struggles faced when trying to get a mortgage as you near retirement age. Since most people will see their earnings fall when they retire, lenders can see this as a sign that you won’t be able to keep up with your mortgage payments.

If you’re nearing retirement age and thinking about applying for a mortgage, or if you’re already retired and want to understand your options, read on. We’ve gathered some of the most common questions we hear from older borrowers. We’ll also share our tips on how to make sure you are still attractive to lenders, even after retirement age.

Is there an upper age limit for getting a mortgage?

While there is no upper age limit for applying for a mortgage, most lenders will have their own limits.

It’s important to remember that lenders will consider each application on a case-by-case basis. This means that being rejected by one lender doesn’t necessarily mean you will be rejected by all lenders.

There are two age limits to consider. The age when you take out the mortgage, and the age when the mortgage term ends.

Most lenders will have a maximum age limit of 65-80 for when you take out the mortgage. The age limit for when the mortgage term comes to an end is usually around 70 to 85.

Age obviously isn’t the only factor that lenders will consider. They will also look at things like your credit history and your income to see if you are likely to be able to afford the payments for the life of the mortgage.

Why is it harder to get a mortgage when I get older?

Most people get a mortgage earlier in life with the intention of completing the repayments before they retire. However, there are many life events that might mean you need to apply for a mortgage later in life.

For example, if you want to get a better deal on your existing mortgage, you may wish to remortgage your existing home. It’s also very common for older people to want to downsize after their family members have moved out. This might mean selling your home and moving to a smaller property. While the downsize might mean you have enough to afford the property outright, there may be a shortfall that you need to cover with a new mortgage. Or you may not have finished paying off the mortgage from your existing property.

The simple reason that it is often harder to secure a mortgage when you are older is because of retirement. When you retire, your income will decrease. Lenders might see this as a sign that you won’t be able to keep up with your payments.

All lenders have to follow something known as the Mortgage Market Review rules and ensure that they check your mortgage will be affordable for the full term. If there are concerns that your income could fluctuate, this will impact the lending decision.

Can I get a mortgage after retirement?

Yes, there are lenders out there who will allow you to take out a mortgage after you have retired, or allow you to take out a mortgage with terms reaching into retirement.

The important thing to remember about mortgages is that the rules aren’t there to exclude people for arbitrary reasons. Lenders are solely focussed on affordability. If the income from your pension will be enough to cover your mortgage payments, you should be able to secure a mortgage.

In many ways, a retired borrower can be a lower risk than a working borrower. This is because your pension income will be fixed, but a worker could lose their job and their income at any point, making their mortgage unaffordable.

Steps for securing a mortgage as an older borrower

If you are concerned that your age will impact your ability to secure a mortgage, you may need to secure proof of your retirement income.

If you are yet to retire, contact your pension provider and ask them to provide proof of your existing pension pot, your expected monthly pension amount and your expected retirement date.

Income is often easier to prove after retirement as you can show evidence of your monthly pension income.

Your income isn’t the only thing that lenders will consider. They will also look at things like your credit history and the size of your deposit.

All lenders are different, so you should always shop around before submitting an application. Working with a specialist mortgage broker can help you to navigate this difficult area with ease and increase your chances of matching with a lender that works for you.

If you’re ready to discuss your options, get in touch with Niche Mortgage Info today.