Joint vs tenants in common
Looking to get a mortgage with someone else? Then you’ll probably have come across the terms joint tenants and tenants in common. Read on and we’ll explain what these terms mean and the benefits of each.
What's the difference between joint tenants and tenants in common?
The terms joint tenants and tenants in common can be confusing, especially if you are a first time buyer looking to secure a mortgage.
While they might sound the same, there are some key differences to consider. Let's take a look at each in turn:
Joint tenants
if you take out a joint tenancy mortgage with someone else, it means that you will act as a single entity.
It doesn’t matter if one person puts in most of the money for a deposit and the other contributes a smaller figure.
You and the other people taking out the mortgage will be seen as equal tenants. That means if one person wants to sell your property, you have to both agree to any sale.
If one of the tenants dies, then their share of the property automatically goes to the other joint tenant.
Tenants in common
If you opt for a tenants in common mortgage, then you and the other people you are buying with will have defined shares, usually reflecting how much money you are putting into the purchase.
This could be a 70/30 split for example. In this case, if a tenant dies the share can be passed onto someone other than the other tenants.
What are the risks of joint tenancy?
A joint tenancy is ideal if you are buying as a couple, and can be taken out whether you’re married or not.
It’s also a good option for family members who are looking to make a shared investment.
However, it does come with risks. If you and your partner decide to separate, then you are both liable for mortgage payments, as you are considered to be a single entity by your mortgage lender.
This can lead to financial difficulties and may complicate an already difficult situation. It can get even more tricky if you own the property with more than two people and one person wants to move out and sell their share, You will either have to all agree to a sale or find an alternative approach.
In this situation, you can sell the property and split the proceeds equally. Alternatively, you can switch from a joint tenancy mortgage to a tenants-in-common mortgage.
To do so you’ll need a ‘severance of joint tenancy’, which you can access via the government’s website. You do not need the agreement of other owners to do so.
What are the benefits of joint tenancy?
A joint tenancy is a great way to keep things simple when buying a property with a partner. Benefits include:
Right of survivorship - this means that if one of you dies, the share is automatically transferred over, without the need for probate. This cuts down on any unnecessary financial issues at what is a difficult time
Equal ownership - joint tenancy keeps things nice and simple. If two of you take out a joint tenancy, you both own half the property
Easier sale - when it comes to selling a property, a joint tenancy is ideal, as everyone must agree to the sale, cutting down on any potential disputes. It’s a less complicated process, too
Can you have more than two 'joint' tenants?
Yes. You can have up to four joint tenants (the same is true for tenants in common too).
If more people want to come in on the purchase, then it can be done so via a trust, with the other owners named as beneficiaries whenever a sale is made.
In all likelihood, though, you’ll usually take out a joint tenancy mortgage with one other person.
What scenarios would you opt for a tenants-in-common mortgage?
A tenants-in-common mortgage can be a good alternative to a joint tenancy in numerous scenarios. such as:
If you’re buying with friends and want the ownership to reflect how much of the deposit you’re paying
If you’re buying a property with your children as a way to help them onto the ladder, but want to keep your investment safe
You want to maintain your financial independence from your partner
What are the benefits of tenants in common?
There are some great benefits from taking out a tenants-in-common mortgage. These include:
Financial independence - each tenant can sell or remortgage their share without having to get consent from the other owners
Inheritance - tenants can choose to leave their share to whoever they wish, instead of having their shares pass automatically, as is the case with joint tenancy
Flexibility - shares can be split depending on each owner’s circumstances, so those earning less can make a smaller contribution and pay less each month
What are the disadvantages of tenants-in-common mortgages?
Greater chance of conflict - because each share is owned individually, it can lead to disagreements when one decides to sell as they don’t need to consult the others
Unequal responsibility - if one tenant owns more of the property, they may find themselves paying most of the mortgage and covering a higher share of any repair costs
Challenging sales - if one tenant refuses to sell and keep their share, it may be harder for those who want to move on to find a buyer for their share
What happens if one 'tenant' dies?
This is one key difference between joint tenancy and mortgages in common.
Joint tenancy - when a joint tenant dies, their share automatically passes to the other joint tenant.
Tenants in common - the separate shares of a tenants-in-common mortgage means that owners can bequeath their share to whoever they choose. This has the potential to lead to conflict if the other tenants are not happy about the person who’s inheriting that share. This is something which should be discussed fully before taking out the mortgage.
Other useful guides
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