Can multiple people apply for a mortgage?

April 17, 2019
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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.

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