How do lenders assess joint mortgage applications: The key factors

Sharing the cost of a mortgage is something many people do. While most joint mortgage products are shared between two individuals, some lenders allow up to four people on a single mortgage application, making home ownership even more cost effective. According to these statistics however, 65% of all joint mortgages in the UK are shared between married couples, 18% between unmarried couples, and 17% between relatives or friends.

Whoever you intend to share your mortgage with, understanding the ins and outs of a joint mortgage application can help you move through the process with clarity, confidence and ease. Here we share the key factors assessed by lenders when applying for a joint mortgage.

Income

Let’s start with a biggie, the income and employment of the applicants can tell the lender a lot about their financial stability and eligibility for approval.

The lender will go through the applicants’ basic salary or wages, associated overtime or bonuses, additional income (such as rental income, pensions, tax credits, business dividends and maintenance payments) and employment status with a fine-tooth comb.

Self-employed mortgage applicants will need to provide at least one year of accounts (ideally two) to support their application.

Credit history

Another vital area of assessment is your credit score. A good credit score will demonstrate that you are a responsible and reliable borrower, while a poor score will increase the risk of mortgage rejection. Lenders perform credit checks at various stages to confirm your eligibility to proceed as Checkmyfile details:

“Mortgage lenders may run what is called a soft credit check early on in your application to see if you are eligible for credit. You and your buying partners may receive pre-approval for the mortgage from this process. Before granting your mortgage, they usually do a hard credit check for everyone involved. This assessment will give them an in-depth view of your credit history, showing how you’ve tackled repaying debts in the past.”

Preparing your finances for their closeup is a must for joint and single applicants, and work should begin early if you are looking to improve your credit score.

Affordability

Your entire expenditure will be examined carefully to check that there’s room for mortgage repayments. During your application, the lender will look at the total household income and offset this against regular outgoings. A debt-to-income (DTI) ratio will also be calculated to establish your creditworthiness.

Deposit

Your deposit could lower the risk factor for would-be mortgage lenders. Larger deposits of between 15 and 25% or higher are preferred, and will help to secure the very best joint mortgage deals. Where your deposit comes from will also be evaluated, with personal savings, gifted funds, equity from a property sale and inheritance all acceptable sources.

The loan-to-value (LTV) ratio is another important area of analysis, with lower LTVs more favourable. The property you intend to purchase will be assessed to decipher if it is suitable security for the loan too. During valuation, your lender will consider the purchase price, property type, property condition, construction and location.

Relationship

As a joint mortgage applicant, you’ll need to disclose the nature of your relationship, financial connections (including any shared accounts and debts), any other shared financial responsibilities, and the balance of income between the both of you.

For those looking for a longer term mortgage, your age, planned retirement age and future plans (from family to career) could also come under scrutiny.

Your joint mortgage application

We’re here to help joint mortgage applicants like you find the very best deals. Our independent mortgage advisors will assist throughout the entire process, and it all starts with a free, no-obligation chat with a member of our team. Contact us today to discuss your options.