Getting a mortgage if you have a poor credit history can be difficult. But what if you are planning to buy a home with someone else and their credit record is significantly worse, or indeed better, than yours, or what if you both have poor credit histories? What then? How are joint mortgage applications affected when one person has bad credit?
A joint mortgage is the same as any other mortgage, except that more than one person has their name on the application.
Commonly joint mortgages are shared by married couples or partners who are buying a home together, although you can share a mortgage with anyone including friends or family members. Some lenders allow up to 4 applicants to share a mortgage.
However, many people are named on a joint mortgage everyone is responsible for making the repayments so you should only enter into a joint mortgage with someone you really trust.
As everyone has joint financial responsibility for a joint mortgage, all applicants will go through the same credit checks as each other.
When you buy a property with a joint mortgage you can choose how you own the property.
If you take out a mortgage as joint tenants, you are legally seen as a single owner. This is the usual option taken by married or long-term couples.
This is choice is often preferred if you are getting a joint mortgage with a friend, business partners or a family member. Rather than being seen as a single owner you each individually own a share of the property.
Mortgage lenders use a prospective borrower’s income to determine how much they are willing to lend. Therefore, with 2 or more potential borrowers, income will in general; be higher and so the amount you be able to borrow will be greater.
Buying a property with someone else also allows you to pool your resources when trying to raise a deposit. This can be particularly beneficial for 2 or more friends looking to buy a property together.
A poor credit history can be caused by a number of things including CCJs, bankruptcy or late payments on a credit agreement. Whatever the cause if you’re considering applying for a joint mortgage how much will one or more of the borrowers’ credit rating impact on the success of that application?
The first thing to remember is that credit history isn’t the only thing that a lender will look at. They are also concerned with your ability to repay your mortgage loan, i.e. the affordability of the mortgage. It may well be that getting a mortgage with a partner puts you in a better position to afford the mortgage than if you were applying for a mortgage on your own; your joint income will probably be higher, and the whole adage ‘2 can live as cheaply as 1’ isn’t exactly without foundation.
Nevertheless, a lender will carry out credit checks on all borrowers so if one of you does have a poor credit history it will have some influence on their decision whether or not to lend to you. All is not lost though.
Lenders don’t all use the same criteria, which means that you may find that one person’s bad credit will have more of an effect on some lenders’ final decision than on others. A specialist bad credit broker like the ones at Simply Adverse will be able to ensure that your application goes to lenders who are likely to be most sympathetic to your circumstances.
A specialist mortgage will also help you to apply to the right lender by looking more deeply at the cause of any bad credit. For example, some lenders have different criteria for people with CCJs under a certain amount or apply different restrictions to borrowers who have been previously declared bankrupt.
If you have a good credit history but your partner has a bad credit history it can be tempting to consider buying in your name only, but there are things to consider.
Firstly, you can’t buy a home with someone else, i.e. both be on the deeds, but get a mortgage in just 1 name. In addition, if you are married, many mortgage lenders will want you to apply for a mortgage jointly, even if you are considering only naming 1 person on the deeds.
In short with the right advice there is almost certainly no reason why you should even have to consider a mortgage on your own, rather than with the partner, or partners of your choice.
Most lenders are quite happy to consider adding a partner to a mortgage. This process requires a Transfer of Equity as it is a change to the legal ownership of the property. You may be able to remain in your existing mortgage or you may choose to take the opportunity to remortgage.
Whichever option you go for the person to be added will be subject to credit checks so their poor credit history could be an issue. For this reason, the most suitable option may be to choose to remortgage with a lender who specialises in providing bad credit mortgages.
Again, a specialist bad credit mortgage broker will be best placed to advise you on this.
As you can see there is no reason why a joint mortgage won’t be available to you just because one or more of the applicants has a poor credit history. As with all mortgage applications the important thing is to be absolutely honest with the broker or lender and not try to hide anyone’s poor credit. Using a bad credit broker like Simply Adverse puts you in the best position to access a bad credit joint mortgage.