With Valentine’s Day fast approaching and thousands of couples up and down the country debating the merits of moving into together and sharing the cost of a home, we at I Am The Agent thought it would be useful to explain what shared tenancy and shared mortgages are and what benefits and disadvantages they can bring.
Shared Tenancy
Even though being approved for a mortgage is on the rise (see below) for many couples a shared tenancy is the only option to set up home together and share the cost of the rent. Where does this leave them from a legal standpoint however?
In the vast majority of shared tenancies in the UK the tenancy agreement will stipulate that each person will be liable for the full rent at any time: ‘jointly and severally’ liable as it is often phrased as. So, if the relationship breaks down then whoever remains in the property will be liable to pay the rent of the other person. As an illustration, George and Harriet move in together on a shared tenancy agreement and each pay £700 per month. After a couple of months they break up and George moves out leaving Harriet liable to pay a whopping £1400 in total each month. Although both parties will be liable until the Landlord or agent is informed of a new tenant, who will then need to be referenced or added to the tenancy.
If you decide to remain alone and change the tenancy agreement to yourself as a single tenant then you will be solely liable. So you can’t just break up and walk out here, you will BOTH be tied in for 6 – 12 months or maybe even longer. Always look at the tenancy agreement you are planning to sign!
In many ways a shared tenancy allows couples to split the cost and move into a property that they couldn’t afford on their own, however be wary of your liability if the relationship breaks down and someone moves out. We are filled with love at I Am The Agent, so we hope the above doesn’t happen and you make a little love nest that becomes a great home but we wouldn’t be doing our job if we didn’t tell you the pitfalls!
Always stay in contact with your agent and Landlord if anything changes with the tenants and movements of those in the property.
Do remember to start your property search at I Am The Agent with us being one of the largest online agents you could find your next dream home here and with little or no tenant charges it’s the best place to start looking.
Joint Mortgages
The Council of Mortgage Lenders confirmed that lending was up at the end of 2013 and for the year overall and this has evidently been boosted by the Government’s Help To Buy Scheme.
For couples who intend on splitting the cost of a mortgage, lenders are more likely to approve a mortgage up to 5 times their combined income according to the Woolwich, one of the largest lenders in the UK market.
So in terms of purchasing a new home then a shared mortgage can be incredibly beneficial and, like a shared tenancy, it allows couples to live in a more valuable home that they probably wouldn’t be able to afford by themselves. Also, if one partner has a poor credit rating it can help to boost this and give them access to extra credit.
We can split joint mortgages into two: ‘joint tenancy’ and ‘tenancy in common’. The first is a straight 50/50 split and if one person dies then that half is transferred over to the other and the mortgage continues although they will be liable for all mortgage payments. ‘Tenancy in common' means that one partner has a bigger share (perhaps because they earn a bigger salary) and, in the event of a death, their share is not automatically transferred unless it is stipulated in a will.
Remember that, in the eyes of the law at least, if you aren’t married when taking out a joint mortgage or tenancy then you will be treated as two individuals should one die.
Also,I know dreadfully dreary, but paperwork and joint decisions will be a big point if you were to break up, you would need to communicate and both agree to sell even if one half of the relationship doesn't want to or has done something unforgivable it’s something that cannot be done without communication and agreement; so a joint mortgage it’s an extremely big commitment.
At Iamtheagent, we recommend on drafting up a will and taking out a life insurance policy to deal with the unexpected and ensure that both parties in any joint agreement are protected and covered when one of the parties dies. Sit down with a notepad and a glass of wine and whilst everything is harmonious jot down ‘what ifs’ and come to a solid agreement on what would happen if a break up (or, in the worst case scenario, a death) was to occur.
Maybe try a 6 month rental to see if everything is still as harmonious when the washing piles up or your loved one drinks your favourite bottle of wine or uses the last toilet roll; very mundane we know but very sensible too!
In the case of a break up you could find yourself paying for a mortgage without living at the property. Entering into a joint mortgage should be considered carefully and ideally professional advice should be obtained.
Happy Valentines!
The Online Property Matchmakers