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Joint tenancy home buying

A joint tenancy when home buying means you have joint ownership with someone else. You share the ownership, responsibilities and rights as a standalone owner would.

One owner cannot force the other to move out or simply remortgage only their share of the property and vice versa. A joint tenancy is usually used by married couples and those in civil partnerships, but it’s important to work out what type of legal structure is best for you.

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What is a joint tenancy?

Joint tenants – up to four people can buy a home together – all own the property. All of the owners in a joint tenancy therefore act as a single owner.

This means any plan to remortgage must be done to the whole value of the property and all at the same time, rather than on a share of the property.

Similarly, if one of the owners dies, then that share automatically passes to the rest of the owners. Generally a joint tenancy between up to four owners is still treated as if it were owned by one person.

This means that you can’t leave part of the property in a will. All owners in a joint tenancy are liable to the full amount of the mortgage, so if one person stops paying, the others will have to cover the repayments.

Advantages of joint tenancy

If you buy a home on your own, your mortgage application will depend on your financial circumstances. Your borrowing power is based on your income, deposit and your credit history.

In a joint tenancy you can potentially borrow more as you could make an application based on two incomes and two deposits. However, if even one party in a joint tenancy has a poor credit score, this could impact your mortgage application.

Another advantage of a joint tenancy is that you can’t be forced out of your home. You are in a legal agreement that all parties in the ownership have certain rights that prevent one having more power over the other.

The home can’t be sold by the other parties without your permission either.

Could tenancy in common be better?

Tenancy in common is an alternative legal structure when it comes to jointly owning property. Under a tenancy in common agreement, all owners can own a defined share of the property.

This is different to a standard joint tenancy agreement where all owners act as a single unit and have equal rights to the property.

Under tenancy in common, you can own different shares in the property, and therefore, unlike a joint tenancy, you can pass on your share of the property in your will.

Similarly, if you die, your share of the property doesn’t automatically go to the rest of the owners. Instead, you could pass this on to a beneficiary named in your will or your next of kin. This type of legal ownership structure is often used by friends and relatives buying property together.

Joint tenancy:

  • equal rights to the property
  • property automatically goes to the other owners if you die
  • you can’t pass on your ownership to someone else in your will

Tenants in common:

  • owners can have different shares in the property
  • property doesn’t automatically go to the other owners if you die
  • you can pass on your ownership to someone in your will

How to change joint tenancy arrangements

You can change from a tenants in common arrangement to a joint tenancy one, and vice versa.

For example, if you get a divorce or separate from your partner who you bought your property with, you can transfer to a tenants in common arrangement in order to pass your share of the ownership to someone else, instead of to your ex.

In reverse, if you get married and want to have equal rights to the property, then you would change from a tenants in common arrangement to a joint tenancy.

Changing from joint tenancy to tenants in common:

  • Apply for a ‘severance of joint tenancy’ using the ‘Form A restriction
  • You do not need to the other owners’ permission to do this
  • There is no fee to process the form
  •  For more information visit gov.uk

Changing from tenants in common to joint tenancy:

  • You need the agreement of the other owners to do this
  • Fill in a new or updated trust deed – use a conveyancer to help you do this
  • This must include a ‘statement of truth‘ confirming that trust deed is true
  • For more information visit gov.uk

How to sell a home with joint tenancy

Under a joint tenancy, all owners have equal rights over the property, which means you can’t sell the property without the agreement of the other owners.

However, in a situation such as a separation or divorce, or relocation, one owner may want to sell, while the others may want to stay.

In order to do this, you will require a court order to remove the other owners so you can sell the property. This can be expensive and time consuming, not to mention, stressful.

Before getting into a joint tenancy arrangement, it makes sense to draw up a legal agreement that defines under what circumstances the property can be sold, what share of the price each owner is entitled to, and so on.

To draw this up fairly and accurately, all owners should seek independent legal advice first.

Want to just move or ‘port’ your mortgage as a joint tenant?

As a joint tenant you would need to make the decision to port your mortgage in unison with the other owners of the property. Most mortgage providers have ‘portable’ mortgages, which means you can transfer it over to a new home if you plan to move.

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However, you may not be able to borrow more and there is likely to be extra fees to pay if you hope to increase your loan – if you are moving into a more expensive home for example.

It could be cheaper to leave your mortgage and get a new one, but there will be exit fees for your current mortgage and arrangement fees to pay for your new one.

Porting your mortgage as a joint tenant is likely to be cheaper if you do not need to borrow more money in order to move into your new home.

Read more…

  • Home Buying Costs Buying a home is the single biggest financial commitment you’re likely to make so make sure you understand the costs.
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  • First Time Buyer Guide If you’re looking for your first home the mortgage market can be daunting.