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As the name suggests, a joint mortgage entails people joining together to obtain a home mortgage. Joint mortgages have increased in popularity during the economic downturn and following the hike in property prices across the UK. In particular, first time buyers such as new couples or recent graduates have found joint mortgages to be an effective and expedient answer to the problem of getting a secure foothold on the property ladder and of course finding a residence in their desired location.
No mortgage should be taken out without first taking a great amount of time and effort considering with their partner or friend whether a joint mortgage is right for them and putting together a clear written plan of agreement addressing the key concerns which can arise when securing a joint mortgage.
It is important to remember that taking a joint property will mean the other property owners have the power of veto over the sale. Naturally, this can cause huge problems if one decides they no longer wish to sell while, thereby preventing the other property owner from doing so. Discuss this before taking out the home mortgage and create a written agreement stating that all involved relinquish the right to veto the proposed selling of the residence.
Unless you are legally married to the person you are purchasing the property with you will legally be classed and treated as individuals and will be dealt with separately in matters relating to the property. It is therefore imperative to have a legally binding written agreement and ensure that the title deeds include the names of all involved in the joint mortgage.
You will be asked to choose between taking out a joint tenancy or a common tenancy. Deciding to take out a joint tenancy will mean sharing the mortgage 50-50 right down the centre. This means that in the event of the death of either person the other person receives the mortgage automatically. If you choose to secure a common tenancy it is possible to set a variable share of the property ownership, which is particularly useful should one of the mortgage partners have a larger income and wish to invest it into a bigger share of the house.
Some of the downsides to joint mortgages are the need to be so meticulous when creating a plan and drafting agreements with your partner, which entails the awkward task of discussing what action will be taken in the event of future disagreements. These disputes, which involve large amounts of money and can have a significant impact on lives, can be extremely difficult to settle.
However, these are offset by clear advantages such as enabling a larger mortgage for a better residence and surer foothold on the property ladder during the current unstable economy. Joint mortgages also enable two people who may have difficulty giving accurate details of their income to secure a mortgage without having to take out a self certification loan which charges higher interest.
When taking out a joint mortgage it is also vitally important to create wills clearly stating where the property should go to in the event of either mortgage partner passing away.
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