In a market where impossibly high house prices speak of a bleak outlook for young singles, over 80,000 approved mortgages last year came from buyers combining their incomes. However, experts are warning couples they could both end up in a financial mess that could be hard to fix, if their relationship doesn’t stand the test of time.
Last year saw 338,900 first-time buyers approved for mortgages* with around a quarter of the total applying on dual incomes.** But independent mortgage broker Choice Finance is warning those thinking of sticking out a bad relationship just to get on the property ladder that they are running their risk of wrecking their credit history.
Choice Finance believe potential home-owners should be aware that by entering into a joint arrangement, both parties are severally liable. If things turn sour and one party stops paying their share of the repayments, a lender will still demand the full monthly amount from the other party. Any missed or late payments show up as black marks on both credit reports.
Matthew Pennell, Managing Director of Choice Finance says “For those in a stable relationship, a joint mortgage is a great way of navigating the current tricky marketplace, but it isn’t without its own complications and should not be entered into lightly.
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“When applying for a mortgage together, both sets of credit ratings are taken into account and what some applicants might not realise is that their partner’s history will follow them if they ever look to borrow money again. If your partner hasn’t been upfront about their spending, it could drag your name through the mud in the eyes of lenders.”
A bad credit rating can not only make getting another mortgage tough, but can also mean higher insurance premiums, refusal of credit card and loan applications, plus potential employers have even been known to retract job offers based on poor credit reports.
Not only can a partner’s credit history cast a lasting shadow, but if a split is acrimonious it can make managing finances difficult in the future. If homeowners want to remortgage or to improve their financial situation by changing to a new fixed rate deal, everyone on the original mortgage contract will have to authorise it. That can be complex if communication has broken down, or if one person is being difficult or spiteful.
If selling looks like the only viable outcome, even this is fraught with difficulty.
“In the event of selling a house when a joint mortgage is in place, ordinarily the profits will be split equally. Obviously, this can seem very unfair if one person has upped and left and not contributed to repayments. Sadly, in those circumstances, you may have to employ legal assistance to level the playing field. Not only is this time consuming and expensive, there’s no guarantee the courts will settle in your favour.”
An experienced and qualified adviser should make any risks surrounding a dual income mortgage clear at the start of the application process, as well as advising on potential options in the event of a split.
Choice Finance source from the entire marketplace to find the best deals on a case-by-case basis. Their team believes transparency from application to completion helps customers make the best decision, whether they choose a joint mortgage deal or go it alone.
For more information, visit www.choicefinancemortgages.com