Tenants in Common Questions

[Deleted User]

Hello,

Here is the situation:

Friend 'A' wants to buy a house and has a healthy Deposit together but the mortgage lending offers are falling short by £30K in order to buy what he really needs.

Friend 'B' is happy to help by becoming a "Tenant in Common" thus bumping up the mortgage lending offers to cover the extra £30K. They agree for Friend B not to have to contribute to the deposit or stamp duty and the deposit remains to Friend A set out in a "Deed of Trust" alongside the home owner percentages they decide. Friend B will Pay 10% of the monthly mortgage repayments for use of the property (storage) but not live there.

If the two friends (A and take out a mortgage together, does the bank need to know that they are opting to be 'Tenants in Common' or are they happy to accept them as normal joint applicants if they pass the usual income and credit report checks?

If the bank does need to know that the friends are going to be 'Tenants in Common,' is it possible for one of the friends (A) to live in the property as their residential home and the other (B) to use it as an 'investment' rather than a residential home ? The Joint Mortgage deal would be a capital repayment for first time buyers.

Finally would it be possible for one of the friends (B) to leave the mortgage solely to the other owner (A) for example after a 2 year fixed rate deal finishes and that owner (A) remortgages as a sole owner providing he can prove he can cover the repayments on his own.

Thanks,
Dave

betmunch

Lenders will need to accept the tenants in common situation, the solicitor will inform them.

Friend B doesnt have to live there, but you will require the correct choice of lender who will allow this, and it may conflict with the tenants in common question.

Friend B cant just leave the mortgage, but you are close to the conditions of Friend A taking it over. Friend A will need to satisfy the lenders (or new lenders) Critera for a new mortgage at the time Friend B wants to be removed, then you will need a solicitor to do a transfer of equity for Friend Bs share of the property to Friend A.

At least thats how I see it anyway

[Deleted User]

Thanks for your reply. Just to clarify about friend B leaving the mortgage - it is possible for them to be removed from the mortgage for example after a 2 year fixed rate deal and this is done through a solicitor transfering friend B's equity to friend A. Friend A also needs to prove to lenders they can afford the mortgage solely on their own.
Have I understood that correctly? Thanks

betmunch

dave8989 wrote: »

Thanks for your reply. Just to clarify about friend B leaving the mortgage - it is possible for them to be removed from the mortgage for example after a 2 year fixed rate deal and this is done through a solicitor transfering friend B's equity to friend A. Friend A also needs to prove to lenders they can afford the mortgage solely on their own.
Have I understood that correctly? Thanks

Not quite, theres more to it than affordability.


First its (currently) affordability at a stress tested rate, not the rate they are currently playing.


Then theres the credit file, if they have a poor credit file they will not be able to take on the mortgage alone.


Then theres all the other criteria a lender looks at, in two years who knows what it will be?


In short, if Friend A would be offered a new mortgage on his own for the required amount then he should be able to take on the existing mortgage without Friend B's input.

getmore4less

B not living there may not be acceptable to all lenders.

[Deleted User]

Thanks for the replies. Cheers, Dave