Which type of mortgage can make buying a house after separating easier?

Originally published on 28th September 2018 at 10:20 AM
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A big consideration, when parting ways, is where each of you is going to live.  If you have a low income (or no income at all) then finding your own place can seem daunting – and being granted a mortgage so you can buy a property on your own, the stuff of dreams.

However, a new type of mortgage could help to make that dream become a reality. The Joint Borrower, Sole Proprietor mortgage is a standard mortgage with a technical twist. And it’s a great option if you’re choosing to live apart, but both want to provide two stable homes for your children.

How does the Joint Borrower, Sole Proprietor Mortgage work?

The mortgage is held on a joint basis – with two incomes taken into consideration – but the deeds (ownership of the property) are held in the name of just one of you. In other words, one of you will own the house, but the mortgage will be shared. This means that you can own a house or flat of your own but have an ex-partner pay towards the property, and a home for your children.

Where can I apply for this mortgage?

The Joint Borrower, Sole proprietor mortgage is available from lots of banks and building societies. Contact individual providers to find out if it is something they offer, or speak to an independent mortgage advisor who can guide you both through the mortgage process.

Will I still need a deposit?

Yes. You will still need to provide a sizeable deposit – probably around 10%.

What if thing change in the future?

The first thing you should do is draft a legal document called a ‘Deed of Trust’ between whoever is going to be the legal owner and the second person paying the mortgage. This means that if the legal owner can’t keep up with their repayments, the non-legal owner will be protected. You can also set out what will happen if either of you want to leave the mortgage.

Will both of us make money if the value of the property goes up?

No. If you aren’t the legal owner, you won’t gain from any potential increase in value of the property – be it rental income or an increase in the sale value. But sharing the increase in value is something you can write into the Deed of Trust, so you can both benefit.

What happens if I want to get a mortgage on another property?

It’s worth bearing in mind that being on this joint mortgage may affect your ability to get a new mortgage on another property, or to refinance on an existing property in the future.

What happens if I want to leave the mortgage?

It might be that arrangements have to change, particularly if one of you meets someone new.

If you have a Deed of Trust then the non-legal owner should be able to give notice that they would like to leave the mortgage. The legal owner then has to agree to re-mortgage the property, or sell it.

If there isn’t a Deed of Trust it’s a little bit more complicated. You would both have to agree to sell the property, or the person who isn’t the legal owner would need to get released by the mortgage lender, or – in the worst case scenario – get a court order. Of course, it’s always best to avoid involving the court if possible so best to think ahead!

For more information on the Joint Borrower, Sole Proprietor mortgage contact The Financial Planning Group. For advice on how to separate amicably with a fair financial split – please contact us on 020 3004 4695.

If you have any questions, or would like some support, please book a free 15-minute call with one of our experts here.

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