Circumstances change and there may come a time when you want to add someone to your mortgage.
Your partner may want to move in with you and be named on the mortgage, for example. Or you may have decided to get a joint mortgage with a friend to give you both a bit more financial security. Alternatively, a family member may have suggested this arrangement to help reduce your financial strain each month.
Whatever your reason, the question is: Can you add someone to your mortgage when remortgaging?
Key takeaways
- Adding someone to your mortgage can help ease financial pressure and provide greater financial security. Sharing the mortgage payments with another person can make them more manageable, whilst combining your incomes may also increase your borrowing capacity.
- Remortgaging with another person may help you secure a better mortgage deal. You could benefit from a more competitive interest rate or more flexible terms than those offered by your current lender.
- There are important financial and legal implications to consider before remortgaging to a joint mortgage. These include remortgaging costs, joint responsibility for repayments and choosing the most suitable type of joint property ownership.
Can you add someone to your mortgage?
Most lenders allow you to add a new borrower to your mortgage using a transfer of equity. There are two ways to do this:
- Ask your current lender: If they agree to a transfer of equity, your lender will need to carry out affordability and credit checks on the person being added to your mortgage. An administration fee is likely to be charged. You’ll also need to instruct a solicitor because a transfer of equity involves a legal process.
- Remortgage to a new deal: A remortgage enables you to change your existing mortgage to a new mortgage deal with a different lender. Both you and the other borrower will need to apply for a joint mortgage and go through the full mortgage application process.
Why remortgage rather than keep your existing mortgage?
Whilst asking your current lender to do a transfer of equity may be the simplest option, there are various benefits to remortgaging instead.
- Your current lender may refuse. If your current lender is unwilling to approve a transfer of equity, this doesn’t mean you’ll be turned down elsewhere. Different lenders have their own criteria so it’s just a matter of finding the right one. Our mortgage brokers can help you with that.
- You may find a better rate than the one you have now. You can shop around for better deals than your current one. You should already have built up some equity in your property since you took out your original mortgage and the additional borrower may have some funds that they can contribute as a deposit. This means that you won’t need to borrow as much as you did before. This will reduce the lender’s risk and you should benefit from a more competitive interest rate as a result.
- You may benefit from more flexible terms. A new deal may provide you with more flexibility than the terms offered by your current deal.
- You may want to borrow more. As both of your incomes will be taken into account, this can increase your borrowing capacity. Another consideration is that your financial circumstances may have taken a turn for the worse since you first took out your mortgage and your current lender has refused to allow you to borrow more. A new lender, however, may be more amenable and be willing to work around some issues, such as bad credit, when you are applying for a mortgage with another person.
Types of joint property ownership
There are two ways to own a property together: as joint tenants or tenants in common.
Joint tenants
If you opt for a joint tenancy, you both have an equal right to the property. If you decide to sell the property in the future, the profit is split equally between you. If one of you passes away, that person’s share of the property is automatically passed to the surviving person. This type of agreement is a common option for couples.
Tenants in common
Being tenants in common offers a more flexible type of property ownership, with each party having an unequal percentage of shares. If you’ve had the original mortgage on your own for a while, for example, you may prefer to have a larger share in the property when you become joint owners because you’ve already paid more towards the property.
When selling the property, you each get your percentage split from the profits. If one of you passes away, that person’s share of the property is passed to their next of kin or named beneficiary, not the surviving property owner. This type of arrangement is ideal when you wish to co-own a property with your siblings or friends.
Considerations when adding someone to your mortgage
Before adding someone to your mortgage, there are some important points to consider.
An early repayment charge
If you exit your current mortgage deal too early, you may be liable for an early repayment charge (ERC). This can be very expensive and negate any benefits of finding a better interest rate elsewhere. Check your current lender’s ERC terms before proceeding with a remortgage.
The costs involved
When remortgaging, there are various costs to consider. These can include an arrangement fee for the new lender, a valuation fee and legal costs.
Linked credit files
If you remortgage with another person, your credit files will be linked due to your financial association. This means that your credit scores will affect each other. If one person has a low credit score, that can impact the other person’s borrowing capability in the future.
Joint liability for the mortgage payments
With a joint mortgage, you are both jointly liable for the mortgage payments. If one person is unable to make a payment, the other person is legally responsible for covering the full mortgage payment. This can cause financial strain, particularly if it’s not a one-off incident. Late or missed payments will be reflected on both of your credit reports. In the event of a default on the mortgage, the lender can pursue either party for the full amount owed.
Your relationship status
Remortgaging with another person has many benefits, such as easing your financial situation, increasing your borrowing capacity and potentially getting a better mortgage deal. However, you also need to weigh up the negatives should issues occur further down the line.
For example, if one of you loses your job and cannot afford to make the mortgage payments, the other person must make them. Aside from the financial strain of doing this, any missed payments can affect both of your credit scores, impacting future credit applications.
If you’re in a couple and split up or you’ve got a joint mortgage as friends and fall out with each other, this can lead to legal disputes over the property. These can be costly, time-consuming and very stressful to deal with.
You also need to carefully consider your choice of joint property ownership with respect to what happens to a person’s share of the property should they pass away.
Get expert advice to ensure the right outcome for your needs
Our mortgage brokers are here to help you make the best decision for your financial needs. They can discuss your circumstances, check the costs of leaving your existing mortgage and assess both parties’ affordability.
If adding someone to your mortgage when remortgaging is a good solution for you, they can search for the most suitable remortgage deals and provide you with impartial advice so that you can make an informed decision. Give us a call on 01322 907 000 to discuss any queries you have and get expert guidance on the options available to you.