A guide to Joint Tenants or Tenants in Common
With the constant rise in house prices, some people choose to buy a property as a group effort, rather than attempting the same on a single income. Becoming joint tenants or tenants in common allows you to take out a joint mortgage and for up to four people to share the mortgage together.
With more people involved in the mortgage, the cost and responsibility are spread out over all parties. With multiple people involved, the risk of purchasing a house, usually a financially strenuous decision, is lessened on the individual.
The two most common types of shared ownership are joint tenants and tenants in common. The main point of difference between the two concerns the death of any of the parties and what then happens to their share of the property.
Joint tenancies are becoming more common for married couples. It is popular as both of those who hold a stake in the home have a 100% stake in the property’s value. For legal purposes they act as a single owner and have equal stake in the property.
If one of the stake holders were to die, the ownership would immediately revert to the other. It is not possible to leave a share in a house to another in the event of death and so this is a form of tenancy generally shared between spouses or significant others.
While this method is most popular for married couples, some mortgages allow up to four people to take out a joint mortgage – this might apply to a group of friends or to allow an individual to get help paying for a house from family members.
Tenants in Common
Tenants in common are structured differently in that they allow those with a stake in the property to leave their portion to someone else in their will. This method also allows for people to buy differing percentages, such as 25% or 75%, depending on how much you are willing to contribute towards the total cost of the property.
This is a method often used by extended family members. For instance, if parents wished to purchase a holiday home for family reunions, their children could help out in order to buy a property that all family members could use. Or parent wishing to help out with the purchase of their child’s first home. Friends that wish to co-habit can also use this method, though it is rarer.
Unlike joint tenancies, people who choose this method of buying a home can potentially use separate mortgages, with each agreeing terms with different mortgage policies. It is, however, generally a lot simpler to work with one mortgage provider and take out a joint mortgage. Most companies would be hesitant or would refuse to take out half a mortgage on a house, as it makes the percentages owned contestable with another company if the investment falls through.
Where do you find a mortgage adviser and how do you choose which one to use?
There are many, many mortgage brokers out there. A local internet search will give you hundreds of results. Many people trust the recommendations of their friends and family, or you could opt for someone that your estate agent recommends. You could choose a completely independent one-person business where you will always be dealt with by the same person or go for a bigger organisation where you might interact with several different people. Be sure to check the credentials of anyone you instruct and don’t forget you do have the security of a heavily and firmly regulated industry on your side.
Your rights as a tenant in a common or a joint tenancy
All of the participants must agree to sell together. If one of the participants disagrees, you may have to get a court order in order to sell the property.
Joint tenancy or a common tenancy can make a divorce or the breakdown of a friendship difficult. Such as in instances where a couple breaks up and one partner wishes to continue living in the property, whereas the other wishes to sell.
Many who choose a joint tenancy option decide on writing up a contract before final agreement. This sets out the expectations of those involved and what you wish to do in case of a move, and it can make such issues easier.
With tenancy in common, you can leave your share of the house to any another person in your will whether or not they are already a shared owner.
Make sure that when you are considering partners to be tenants in common that they are people you want to potentially live with, will work well as roommates, or will be understanding with any difficulties that you or another potential stake holder may have. This helps avoid any misunderstandings from the very beginning, making such a decision less stressful.
Before undertaking either type of shared property ownership, always seek help and advice from an independent mortgage broker and make sure you are making the right decisions for you.
Your home or property may be repossessed if you do not keep up repayments on your mortgage. The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK. Reeds Financial is a trading style of Reeds Financial Limited which is an appointed representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority. Reeds Financial Limited is registered in England and Wales no: 12656133. Registered address: Reeds Financial Limited, Innovation Centre Medway, Maidstone Road, Chatham, Kent, ME5 9FD. A fee of £499 is payable on application, for our service in relation to mortgage contracts.
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