A focus on joint mortgages

Mortgage market view

Once again, the Bank of England’s Monetary Committee has increased the Base Rate¹ by 0.25%, taking the rate to 0.75% (as of March 2022) and returning it to a pre-pandemic level.

Liam Boardman, Senior Wealth Mortgage Specialist, says that Bank of England’s third consecutive rate rise has many clients concerned about how high mortgage rates will get.

“Where mortgage rates will end up and the world economy, given the current inflation levels and the crisis in Ukraine, are what is on our clients' minds this month,” says Boardman. “While we cannot say for sure where rates will end up, our current view is that we expect continued marginal increases throughout the remainder of this year. It's important to seek out professional advice on product suitability before making a decision, as every situation is different.”

However, even the impact of inflation and successive rate rises has not cooled the property market. House prices continue to rise, driven by the imbalance of demand versus supply. Boardman adds that clients are looking to secure the rates while they are low, especially when reviewing their current lending.

Last month we shared an update on offset mortgages. Since then we have launched a new five-year offset tracker mortgage product. See Barclays current mortgage rates [PDF, 622KB].

Subject to application, financial circumstances & borrowing history. Terms and conditions apply.

This month we focus on mortgage solutions that allow clients to help those close to them get into the property market. Known collectively as joint mortgages, they include the joint-borrower, sole-proprietor mortgage and the family springboard mortgage.

What is a joint mortgage?

A joint mortgage is when you apply to borrow money to buy a home with someone else, like your partner, a friend or a relative.

Before you buy a property with your partner, family or friends, you need to be aware of both the benefits and risks of taking out a joint mortgage:

• Everyone who applies will have to meet our lending criteria
• All named persons on the mortgage are jointly liable for the mortgage payments. This means that if one of the named mortgage holders is unable to pay their share of the monthly mortgage payment, the others must ensure the whole amount is paid or risk going into default
• All applicants will have a legal claim to ownership of the property

Can I get a joint mortgage with a guarantor from Barclays Wealth Management?

Barclays does not offer a mortgage with a guarantor but clients who meet the lending criteria can apply for a joint-borrower, sole-proprietor mortgage.

This type of mortgage allows an eligible client to apply with someone, take joint responsibility for making mortgage payments, but retain no legal claim to the property. The difference between this mortgage and a guarantor mortgage is that guarantors are only liable for the debt if the mortgage applicant cannot pay the monthly costs.

Both the client and the proprietor applicant will need to show that they can afford the mortgage payments. However, the affordability can be completed by one applicant (i.e. if one applicant’s income is sufficient for the mortgage to meet affordability, the other applicant does not have to also show they can afford the mortgage). However, both will remain liable for the debt and monthly payments.

According to Boardman, the joint-borrower, sole-proprietor mortgage enables a client’s income and assets to be taken into consideration when applying for a mortgage and often leads to a larger lending amount.

“This is incredibly common mortgage solution with Barclays Wealth clients,” says Boardman. “With ever-rising house prices, clients often look to help those close to them, such as children or grandchildren, by going onto the mortgage with them. We also must emphasise with clients that taking on an additional mortgage may impact their ability to borrow funds in the future.”

Being joint tenants versus tenants in common

When you buy a property with other people using a joint mortgage, you need to choose how your ownership of the property is defined legally. You can own the property as joint tenants or as tenants in common – but you should seek legal advice before deciding which option is best for you.

Joint tenants

This is usually suitable if you are married or in a long-term relationship with the person with whom you are buying the property. It means you each

• Have equal rights to the property
• Can claim an equal share in any profit made if the home is sold
• Will automatically inherit the property if the other person dies

Tenants in common

This option might be suitable if you’re teaming up with friends or family members to buy a home. It means you:

• Can each own a different share of the property
• Won’t automatically inherit the property if the other tenants die
• Can choose to whom you want to leave your share in your will

If you choose to be tenants in common, you should consider asking your solicitor whether you need to set up a deed of trust, which sets out how much of the property each tenant owns. This helps you avoid any misunderstandings or problems if you want to sell your share of the property.

Family springboard mortgage

Our Family Springboard Mortgage means you can put up 10% of the property purchase price for a loved one and earn interest on this sum for the agreed term.

This way, you give the person a leg up on getting in to the property market and they own and remain responsible for the property and its monthly payments.

How it works is that after they’ve applied for our Family Springboard Mortgage, you open a Helpful Start account with us and put 10% of the chosen property purchase price into it.

Since you've provided 10% as security for five years, your loved one can borrow up to 100% of the purchase price. After five years, and if all the mortgage payments were kept up, you’ll get your money back with interest – to re-invest, put towards your retirement or to help someone else. There’s no limit to the number of Helpful Start accounts that you can have open at the same time. For additional information, download our Helpful Start terms and conditions [PDF, 249KB].

Please note that if the home buyer misses a payment, it might take longer for you to get your money back and you might not get back your full savings and interest.

Subject to application, financial commitments and borrowing history. Terms and conditions apply.

Considering cash as a gift?

For most mortgages, buyers need provide at least 5% of the purchase price as a deposit. If you can afford to help your relative or loved one put down a 10% or 25% deposit, they’ll have access to a far greater choice of mortgage options, which could include lower interest rates.

“When giving a large sum towards the purchase of a house, consider having a formal agreement in place that states it’s a gift,” says Boardman. “This may help to serve as a reference for future conversations, removing doubt about whether the money needs to be repaid and reducing the emotion attached to the transaction.”

If your loved one is buying with someone else, and you want to help with funding the deposit, then setting up a legally binding document, known as a deed of trust, gives you both protection if their relationship ends. For example, it means you can note that the property’s deposit belongs to one person only in a joint purchase.

Boardman adds that it's often important that if you offer funds to help purchase a property, it should be declared as a gift. “If you were to loan the funds instead, the prospective lender could consider it as secondary borrowing, which is often frowned upon for deposit or associated cost requirements.”

Before making any decision regarding purchasing a property, always seek independent financial advice.

Boardman notes that with house prices and interest rates continuing to rise, more clients are looking at how they can help those close to them secure their first property.

“More than ever, I am seeing clients seeking to help those close to them get onto the property market,” says Boardman. “The options noted above give a good foundation for different available routes. The key is to speak with one of our Wealth mortgage specialists early in the process – we are here to help and answer any questions.”

Things to consider

Subject to application, financial circumstances & borrowing history. Terms and conditions apply.

Your home may be repossessed if you do not keep up repayments on your mortgage.