Taking out a mortgage with someone, whether a spouse, partner, family member or friend, is a significant financial commitment. You make the application jointly and are responsible for repaying the loan each month.
But what happens if your circumstances change and you want to remove the other person from the mortgage? Can one name be taken off a joint mortgage? This blog explores your options.
What is a Joint Mortgage?
A joint mortgage means two or more named borrowers on the loan. You will both be equally responsible for meeting the repayments each month, even if you separate or divorce in the future. When applying, the lender will consider your income and personal situation when deciding whether to approve the mortgage.
Even if only one of you lives in or owns the property, you are both still liable to repay the mortgage. One benefit is that joint borrowers may find it easier to get a bigger mortgage as two incomes are considered. However, it also means that if one person stops paying, the other borrower is still responsible for the monthly payments.
Alternatives to getting a Joint Mortgage
Rather than getting a joint mortgage, there are a couple of alternatives you could consider instead:
Sole mortgage
One person applies and takes out the mortgage in their name only. This means they have individual responsibility for the repayments. The other person is not liable if they fail to pay the mortgage. A potential downside is that buying on one income may limit your borrowing amount.
Tenants in common
This allows the buyers to jointly own the property while holding defined shares that are not necessarily split 50/50. For example, you may agree on a 60/40 or 70/30 split based on who contributes more to the deposit.
The main benefit of tenants in common is that each buyer can get an individual mortgage secured against their share of the property. One party’s credit history does not impact the other. If one wants to sell up, they can do so without affecting the rights of the remaining owner. They can also state in their will what should happen to their share when they pass away.
However, potential drawbacks are that solicitor fees may be higher, and determining each party’s share in the eventual sale can get complicated. Banks also tend to prefer lending to joint mortgages. But for more independent buyers, tenants in common allow for separation of ownership and borrowing liability.
Guarantor mortgage
With this approach, while still involved to some degree, the guarantor takes a secondary position on the mortgage obligations. They pledge to cover any missed repayments by the one party named the borrower if that person defaults or falls into payment difficulties for any reason.
Acting as a guarantor may help someone you are buying the property with but cannot secure a mortgage in their sole name. This could be due to factors like starting a business or being self-employed. While legally, the guarantor can be asked to pay up the owed amounts, in practical terms, their commitment often reduces over time as the primary borrower builds up their credit profile – making default less likely.
Pros and cons of a Joint Mortgage
There are some advantages and possible disadvantages to weigh up when considering applying for a joint mortgage:
Pros
- I may be able to borrow more money with two incomes
- Often needed for first-time buyers using Help to Buy schemes
- Strengthens your application if one buyer has a poor credit score
- Shared responsibility and costs with your partner
Cons
- Both are liable for total mortgage repayments
- Need to rely on the other party to help make payments
- Difficult to remove a name if circumstances change
- Relationship breakdowns can get complicated
On balance, joint borrowers often find it easier to get on the property ladder. But it requires trust and carries financial risk if one person cannot or does not pay.
Is It Possible to Remove a Name from a Joint Mortgage?
It is sometimes possible to remove a name from a joint mortgage by transferring the mortgage into one person’s name only. However, this is not straightforward, and mortgage lenders are typically reluctant to allow it.
Here are the key things to know:
Remortgaging is usually needed
The person keeping the mortgage will likely need to remortgage the property into their sole name. This means going through affordability and credit checks to qualify for a new loan based on their income alone.
A lender agreement is vital
The original lender must agree to remove the other borrower from the mortgage. Not all lenders allow this, so you may need to switch to a new lender.
Consent from both parties
The other person on the mortgage must agree and sign authorization forms to remove one borrower. Their credit file will show the closed account.
Property rights get complicated
Even if no longer liable for the mortgage, the person removed may still have a legal entitlement to the property, which needs addressing. This depends on marital status and how the deed is held.
So, while taking someone off a joint mortgage is sometimes possible, it can be a complex, lengthy and costly process. The person remaining on the loan must be able to afford repayments alone. Alternative options, such as selling the home and splitting proceeds, may be more straightforward.
Reasons to try to remove a name from a Joint Mortgage
There are a few situations where you may need or want to remove an individual from a joint mortgage:
Relationship or marriage breakdown
Removing one name may be the best solution if you and your former partner can no longer afford joint mortgage payments. It avoids continuous disputes over money and responsibility. Be aware that other property rights still need deciding, such as who lives there or is entitled to sale proceeds.
One borrower is declared bankrupt
If one of the mortgage holders goes bankrupt, it can affect your credit rating and ability to keep up with payments. Taking their name off the loan can prevent further money problems. However, it still leaves issues around the rights to the actual property to settle.
Emigration overseas
If your joint mortgage holder emigrates abroad, removing them from the loan means the remaining borrower takes complete control. Be conscious that the person leaving is giving up their potential property rights and investment.
One borrower cannot contribute
Suppose a change of circumstances, such as losing a job, illness or having kids, means one borrower can no longer afford to pay their share. In that case, the other person may seek to take sole responsibility for mortgage payments. This provides clarity going forward but may not be quickly approved by lenders.
Relationship breakdown but want to keep property
Unmarried joint borrowers who split up often still wish to retain ownership of the mortgaged property for their security. Transferring the mortgage into the name of whoever will reside there provides future stability.
Removing someone from a joint mortgage simplifies liability and payments for those remaining on the loan. However, mortgage lenders rightly set a high bar to approve it due to the financial complexities. Seeking legal and financial advice is highly advisable before progressing too far.
