All you need to know about tenants in common
If you’re thinking about getting a mortgage with someone else, you might want to consider tenants in common. Find out all you need to know here
What is tenants in common?
Tenants in common is an arrangement which allows two or more people to own a share in a property. With this type of agreement, there are three main things to remember:
The split in the share does not have to be equal; you can each own different shares in the property
The property will not automatically go to the other tenants if you die
You can pass your share of the property on in your Will.
Who does tenants in common suit?
Parents who want to help their children on to the property ladder and protect their investment
Those who want to invest in a property but don’t have enough money to do it alone
Couples who want to buy a property together but want to protect their investment
Those who have children from a previous marriage and want them to benefit from their estate (provided they have a written Will)
Couples who have divorced or separated can also change their ownership from joint tenants to tenants in common so they can leave their share of the property to someone else.
Tenants in common is also a way to cut inheritance tax. Consult a solicitor about putting your children or beneficiaries as part of a trust so that the property will not be liable to inheritance tax in the usual way.
It can also help with care home fees, as the government can only means test you for the part of the property that you own.
What is the difference between joint tenants and tenants in common?
Joint tenants or joint tenancy is where two or more people have equal ownership in a property. If one of the joint tenants were to die, ownership would pass to the remaining tenant or tenants – you can’t leave your part of the property to someone else in your Will.
With tenants in common, on the other hand, it’s possible for each tenant to own a different sized share of the property (although they can also split the property equally if they wish to). Ownership does not automatically pass to the remaining tenant if one were to die, so you can pass your share on to someone else in your Will.
In both cases, if one tenant wants to sell up, all tenants must agree.
What to consider before getting a tenants in common mortgage
It’s important to consider all the outcomes before you sign a tenants in common agreement. It’s worth sitting down to discuss:
What would happen if one of you were unable to pay your share of the mortgage repayment?
What would happen if one of you wanted to sell their share in a few years?
How will decisions about the house be made, such as home renovations, bills and who lives there?
Who would inherit the other tenants’ share of the property if they were to die?
Your home may be repossessed if you do not keep up repayments on your mortgage