Adding Someone To Your Mortgage: A Simple Process?

Adding someone to your mortgage can be a practical solution in certain situations, such as when you're struggling with repayments or experiencing a major life change like marriage. While it is possible to add someone to an existing mortgage, it's not always straightforward. Lenders will assess the financial situation of both parties and may require refinancing, involving legal and administrative processes. It's important to consider potential downsides, such as the impact on the initial deposit and decision-making dynamics. Exploring alternatives, such as rental-like arrangements, is also worth considering.

Characteristics and Values of Adding Someone to a Mortgage

Lender criteria

Lenders will always assess the financial situation of both you and the person you wish to add to your mortgage. They will evaluate the eligibility of the additional person by conducting the usual credit and affordability checks to ensure they fit the mortgage lender's criteria. This includes assessing their income, credit score, and identity. Therefore, it is crucial to ensure that the person you wish to add meets both the affordability and credit criteria of the lender.

If you are considering a remortgage, it is advisable to compare mortgage programs to get the best rates. You can request a quote from your existing lender in conjunction with a broker to explore additional remortgage offers. A broker can also assist with the entire mortgage application process, including liaising with solicitors and other parties.

It is important to note that adding someone to your mortgage may impact your initial deposit. If you originally purchased the property on your own and later added someone, and the deeds reflect a joint tenancy, you are both entitled to an equal split of the property. Additionally, in a tenancy-in-common agreement, a party can sell their share of the property at any time, which could result in owning the property with a stranger or a less-than-ideal co-owner.

Furthermore, some lenders may have fees for handling the transfer of equity, and you will need to budget for solicitor fees. Before proceeding with a transfer of equity, it is essential to consider the potential implications down the road.

Legal and administrative processes

Adding someone to an existing mortgage can be a practical solution in some situations, especially if you are struggling with repayments. However, it is important to be aware of the legal and administrative processes involved. Firstly, lenders will always assess the financial situation of both parties, so it is crucial that the person being added meets the affordability and credit criteria of the lender.

If your lender agrees to add your chosen party to the mortgage, you may need to hire a solicitor to provide legal advice. The solicitor can help you decide on the percentage of ownership of the house, which is an important consideration. For example, in a joint tenancy, both parties have equal ownership of the house, and if one person passes away, their share will automatically pass to the other. In a tenancy in common agreement, a party can sell their share of the property at any time, and their share will not automatically transfer to the other party but can be left to someone else in their will.

In terms of the administrative process, you will need to contact your lender to see if you can simply add the person. They may tell you to refinance your home, which essentially means taking out a new mortgage. You will need to fill out a Uniform Residential Loan Application, requiring full names, social security numbers, pay stubs, bank statements, and tax returns. After the new loan is processed, you will need to sign the documents and pay any closing costs.

It is worth noting that there are alternative options to adding someone to your mortgage. For example, you could add the person to the deed of the house, making them one of the owners without them being legally liable for the mortgage. Another option is to make a private agreement, where the other person pays you each month, similar to a landlord-tenant arrangement, or contribute to a joint bank account used for mortgage payments.

Joint tenancy

The most common example of joint tenancy is between spouses or common-law partners. A joint tenancy mortgage gives all parties to the agreement equal ownership of the home, as well as equal responsibility for the mortgage payments. Married couples generally choose a joint tenancy mortgage because they want equal ownership of the home. Joint tenancy is also ideal for married couples or couples who intend to get married.

The main difference between joint tenancy and tenants in common is that tenants in common do not include an automatic right of survivorship. If a tenant in common dies, their ownership share of the property does not go automatically to the other co-owners but becomes part of the deceased person's estate. The deceased's portion of ownership will then be dispersed according to their will. One important detail of joint tenancy mortgages is that a joint tenant can unilaterally decide to convert a joint tenancy to a tenancy in common.

There is also more flexibility when it comes to disposing of the property, either through a sale, gift, or inheritance. Unlike joint tenancy, tenancy in common enables co-tenants to sell their interest in the property without the consent of their co-owner(s). When applying for a mortgage as a joint tenant, co-tenants can combine their income and debts to increase their chances of qualifying for a mortgage.

To add someone to your mortgage, contact your lender to see if you can simply add the person. However, it is likely the lender will tell you to refinance your home, essentially making you take out a new mortgage. While looking for a lender, fill out a Uniform Residential Loan Application, which will require your full names, social security numbers, pay stubs, bank statements, and tax returns. After the new loan is processed, sign your documents and pay any closing costs.

Tenants in common

A tenants-in-common mortgage arrangement allows two or more people (or corporations) to share ownership of a property. Each owner has an individual and undivided share, though these may not be equal. For instance, two people could each own 25% of the property, and a third person could own the remaining 50%.

All tenants in common are responsible for the usual homeowner responsibilities, such as property tax, mortgage payments, and any other home repairs needed. If one person tends to pay for these expenses using their own money, they should always be reimbursed by the other tenants. It is important to note that the other tenants in the agreement do not automatically gain ownership of the property owned by a deceased tenant. The deceased tenant's share of the property will go to their beneficiaries or heirs.

When entering into a tenants-in-common mortgage, it is advisable to work out an agreement in advance and put it in writing so that everyone knows their monetary responsibilities. While formally agreeing to rules for each co-owner to follow is not required, it is a good idea. To ensure an agreement is legally binding, you will need to get professional input from a lawyer, who can also help draw up a contract.

Alternative options

Adding someone to an existing mortgage can be a challenging task. Lenders will always assess the financial situation of both parties and the person being added must meet both the affordability and credit criteria of the lender. It is likely that the lender will ask you to refinance your home, essentially making you take out a new mortgage.

• Private agreement: If the person moving in is someone you trust, you may find it easier to have them pay you each month as a tenant would pay a landlord. Alternatively, you could set up a joint bank account that is used only for mortgage payments. This option is best suited for married couples.
• File a quitclaim deed: If you want to add someone as a property owner, you can file a quitclaim deed with the county. This option does not require refinancing, but it is important to note that you will remain solely responsible for paying the mortgage.
• Loan assumption: This option involves one party taking over full responsibility for the mortgage with the lender's approval. It is not always available and depends on the original loan terms and lender policies.
• Loan modification: In this case, the lender agrees to alter the terms of the existing loan to accommodate the change in borrowers.
• Sell the property: If all other options are unavailable, selling the property may be the only solution to remove the obligation from both parties.
• Create a contract with a lawyer: A lawyer can help you draft a cohabitation agreement that ensures both parties contribute equally to the monthly mortgage and protects both parties in the event of a breakup.

It is important to carefully consider your personal situation and the potential downsides of each option before making a decision. Adding someone to your mortgage can have a significant impact on your initial deposit and the decision-making process regarding the property.

Frequently asked questions