How Many People Can Be On A Mortgage?

In November 2023, the average UK house prices fell drastically, especially in London, where property prices decreased by 6% in a year in some cases. 

However, experts warn first-time buyers that despite recent trends, property prices are still at an all-time high compared to the market before the pandemic. 

Consequently, it is no surprise that many prospective homeowners are willing to jump into the mortgage scene with their family or friends. 

But, with fewer lenders approving mortgage applications of three or more participants, finding a suitable lender for multi-applicant mortgages is a challenging task. 

That’s when the services of an experienced broker can come in handy.

So, whether you are a couple, a group of friends, or a family, keep reading as we answer the burning question – “How many people can be on a mortgage?” 

From the application process to the eligibility criteria, we’ve got you covered!

What Is A Multi-Applicant Mortgage?

Also known as a “multiple person” mortgage, this type of financing model involves multiple individuals sharing the financial responsibility of a home loan. It’s a handy solution for those keen on co-buying a home but lacking individual financial resources.

However, it’s not always rainbows and butterflies. Joint mortgages and the common practice of adding names to a mortgage come with their fair share of risks. 

Firstly, all borrowers on the loan share the responsibility for repaying the debt. If one borrower falters on a payment, the others are left holding the bag.

Secondly, each borrower’s credit history affects the loan application, and a missed payment by one might cast a shadow over the credit scores of the entire mortgage holders.

How Many People Can Be On A Mortgage?

Typically, a mortgage application accommodates three or four borrowers at most. 

However, most lenders cap it at two applicants, and those who permit more often require them to be family members. 

Only a handful extend the option for multi-person mortgages with unrelated borrowers, like a bunch of friends.

Interestingly, this type of mortgage, involving three or more applicants, is sometimes referred to as a 3-way/4-way mortgage, 3-person mortgage, or 4-person mortgage.

Interestingly, some lenders will extend to 3-4 borrowers but only use income of that of two borrowers on the application. 

How Do 3-Person And 4-Person Mortgages Work?

Once set up, multi-applicant mortgages are quite similar to residential mortgages. The main distinction lies in the fact that three or four individuals share legal responsibility for repayments and hold rights to the property.

Typically, all applicants must reside in the purchased property as owner-occupiers (however this is not always the case). Alternatively, a joint borrower sole proprietor agreement allows a mortgage for more than two people, with only one named borrower living in the property.

How Is Ownership Divided?

Mortgages with three or more applicants are generally established on a tenants-in-common basis. 

Unlike joint mortgages providing equal rights, tenants-in-common implies each applicant holds a specified percentage stake, formalised with a solicitor before purchase.

Income Declaration 

Lenders for multiple-person mortgages often consider the incomes of only two applicants to determine borrowing capacity, usually the top earners. 

For instance, if applicant A earns £50,000, applicant B earns £30,000, and applicant C earns £60,000, the total annual income of the group is £140,000. 

However, the lender will only consider £110,000, i.e., the sum of the annual earnings of the top earners (applicants A and C).

Some lenders, however, permit all parties to declare their incomes, enhancing collective buying power.

Factors like loan-to-value (LTV) ratios may influence this, allowing full income declaration if the LTV is below 80%.

Further, to secure approval for a three-person mortgage with full income declaration, consult a specialist broker. 

They possess close relationships with lenders suitable for multi-applicant mortgages, increasing your chances of approval on the first try.

Multi-Person Mortgage Application Process

1. Gather Your Paperwork

Whether going solo or teaming up with family or friends, lenders will require the following documents:

• Proof of identity 
• Three months of bank statements
• Proof of income 
• Proof of address

2. Check Your Credit Score

Each applicant should get their credit report and assess their score, aiming for a score between 420-860, of course the higher the better. This score will determine your mortgage eligibility.

3. Contact A Mortgage Broker

Consult an experienced mortgage broker to streamline the process, assess the suitability of a multi-person mortgage, and land a cracking deal!

Multi-Person Mortgage Eligibility Criteria 

1. Income Requirements 

Having multiple incomes can be advantageous, but some lenders may perceive it as riskier, potentially leading to higher interest rates. 

While high incomes and good credit scores for each applicant are ideal, one’s dynamic personal circumstances make it important to consult a broker. Only they can provide precise insights into the specific requirements for each participant.

2. Deposit Amounts And Loan-to-value 

Pooling your deposit with other applicants can trim down the total borrowing amount. However, a higher deposit can pave the way to lower interest rates, given a lower loan-to-value (LTV) mortgage. 

Notably, opting for a lender accepting deposits from all mortgage applicants can be advantageous.

How Much Can You Borrow On A Multi-Person Mortgage?

When figuring out the top borrowing limit for a 2, 3, or 4-person mortgage, it’s a common practice to conduct an affordability assessment. 

This is based on the incomes of the two highest earners as mentioned with a lot of lenders. Typically, lenders allow you to borrow 4.5x the total annual income.

However, some lenders may throw the rulebook out of the window and consider everyone’s income in their calculation! 

Interestingly, some lenders even boast higher lending caps, reaching up to 5 or 6 times the annual income.

These factors make it all the more important to consult a mortgage broker and ensure you get paired with a suitable lender.

Lenders To Consider for Multi-Person Mortgages

• Skipton Building Society: Accepts up to four applicants and considers the incomes of all parties, provided they plan to reside in the property
• Teachers Building Society: Considers 100% of the first two applicants’ incomes and 50% of one additional applicant
• Leeds Building Society: Takes into account the income of up to four individuals for affordability, but all must be part of the same family
• Metro Bank: Considers incomes of all participants, accommodating up to four individuals if they are close family relatives
• Barclays: Accepts up to four applicants, factoring in the income of up to two applicants for affordability assessment

Again, remember that most lenders offering multi-person mortgages exclusively collaborate with brokers. 

So, to explore the full spectrum of options, we recommend applying through a broker who can provide comprehensive insights into the available choices.

Advantages Of Multi-Person Mortgages

1. More Deposit

Collaborating with others means you can amass a more substantial deposit than you could muster alone. This not only beefs up your chances of property ownership but also opens doors to better interest rates.

2. Borrowing Power

With at least two incomes factored into your affordability assessment, you generally qualify to borrow more money than you would when applying solo.

3. Credit Boost

If your credit history is not at par, teaming up with someone with a solid track record can be a game changer as it improves the overall application credit score. 

4. Better Affordability

Not everyone has the financial muscle to tackle a mortgage. As such, a multi-person mortgage allows you to team up, making it a more affordable way to step onto the property ladder.

Disadvantages Of Multi-Person Mortgages

1. Future Safeguarding

Exiting the mortgage down the road? Brace yourself for heated discussions and potential costs.

And if a co-owner dies, the surviving partners will not just inherit their property share but also their burden of repayments. 

2. Mortgage Liability

With more mortgage participants, there is a higher risk of someone or the other faltering on their repayment and the rest having to pay on their behalf. 

3. Shared Credit Woes

If your mortgage partner has a bad credit history, it could throw shade on your credit scores and the overall application.

4. Paperwork Overload

More heads, more paperwork. With each additional applicant, you will be diving into deeper and deeper piles of paperwork!

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.