Can You Add Someone to a Mortgage?

Can you add someone to a mortgage? Adding someone to your mortgage is a significant financial decision that requires careful consideration. Whether you’re looking to share ownership of your home or adjust your mortgage terms, there are several necessary steps involved. From understanding the legal process to evaluating potential risks and benefits, it’s essential to know what’s at stake before making any changes. Knowing how to navigate this process can help you make the right choice for your situation.

Can You Add Someone to a Mortgage?

Yes, you can add another person to your mortgage by either working with your current lender or refinancing with a new provider. Adding someone involves legal changes to the mortgage, specifically through a transfer of equity (TOE) process. This process requires your mortgage lender to evaluate the new borrower’s financial situation, including their income, credit history, and ability to repay.

Kindel Media | Pexels | You can add another person to your mortgage by working with your current lender or refinancing with a new provider.

How to Add Someone to Your Mortgage

Adding someone to a mortgage involves more than simply putting their name on the agreement. You’ll need to submit documents to your lender, who will then assess the new borrower’s financial details.

Here are the two primary ways to do this:

1. Adding Someone to Your Existing Mortgage

If you decide to add someone to your current mortgage, you’ll need to contact your lender. They will then take the new borrower through a process similar to a fresh mortgage application. The lender checks the person’s income and credit history to ensure they meet the criteria. Even if your payment history is spotless, lenders are not obligated to approve someone who doesn’t qualify.

You may also need a solicitor to complete the legal updating of the property deed, which can incur additional costs.

2. Applying for a Joint Mortgage

Alternatively, you can apply for a joint mortgage. This process requires both individuals to go through the lender’s approval process, including a property valuation and a detailed assessment of their combined financial circumstances. While this option can offer better terms, you’ll essentially be starting fresh with a new mortgage, and both parties must qualify.

How Can Adding Someone to a Mortgage Affect You?

Adding someone to your mortgage can have significant financial implications. One of the most important factors is how this affects your property’s equity. Adding someone gives them the right to a share of the property’s value.

For example, if you initially purchased your home with a 10% deposit of £20,000, adding a co-borrower typically splits the property ownership 50/50. This means you may lose a portion of your invested equity, as the other person automatically gains half of the property’s worth.

On the other hand, sharing mortgage payments can lighten the financial burden. However, if the relationship ends or the property is sold, you may face financial risks, such as losing your original investment. Assessing whether adding another person is beneficial in the long term is vital.

What to Consider Before Adding Someone to a Mortgage

Before making any decisions, consider these important factors:

Your Relationship

If you’re married or in a civil partnership, you don’t need to add your spouse to the mortgage, as they already have a claim to the property. Adding them to the mortgage is necessary if you’re not married and wish to co-own the property.

You might want to consider legal agreements like tenants in common, which allow you to specify ownership shares other than the typical 50/50 split. This can be especially useful if one person has invested more upfront.

Kindel Media | Pexels | If you’re married or in a civil partnership, you don’t need to add your spouse to the mortgage, as they already have a claim to the property.

Legal Implications

Adding someone to your mortgage has legal consequences, especially concerning inheritance, taxes, and future separation. Consulting with a solicitor is highly recommended to ensure that both parties are protected and aware of their rights. They can help draft documents such as a deed of trust, ensuring that each party’s share is clearly defined and safeguarded.

Credit History

Your financial health can be impacted by the credit history of the person you’re adding. If the new borrower has a poor credit score, this may reflect on your own credit profile and make future borrowing more challenging. A joint mortgage links both parties’ credit histories, so it’s essential to consider how this could affect your financial options in the future.