Joint mortgage with a friend: What happens if one dies?
Published 8 November 2016 by Kyri Levendi
There are a number of things to think about when buying a house with a friend.
You might think you're never going to be able to step onto the property ladder if you're a single home buyer. And let's face it, it's hard enough to save up for a deposit and get accepted for a mortgage when there's two of you, never mind if you’re trying to do it on your own.
But that doesn't necessarily mean you won’t be able to own a home unless you have a partner – you could always look into buying with a friend. With the number of friends buying together increasing, we look into what will happen when one person in a joint mortgage dies.
Jointly and severally liable
When you take out a joint financial commitment, you and the person you're living with are both ‘jointly and severally liable’ for the debt. That means if the other person can't keep up with repayments, you might have to.
So if you enter into a joint tenancy and the other person dies before you pay off the mortgage, you'll need to show that you can afford to take over the mortgage payments to continue living there. You might be able to do this if you have enough savings built up or the deceased left you money in their will.
A lender will need to approve a new mortgage application for this to happen. If your application is unsuccessful, you may need to sell the property to help clear the rest of the mortgage. Alternatively, if the mortgage is paid off at the point of death, you will get sole ownership of the house.
Joint tenants vs tenants in common
If you're wanting to leave your share of the house to family in a will, it might make sense to stop the joint tenancy and become tenants in common. As tenants in common, you'll be able to leave your share of the house to whoever you like.
With this type of agreement, it is possible to draw up a will that allows you to leave your share of the property to family, whilst giving your friend the right to live there until their death. Your family would then be able to sell the house after they die.
To do this, you would have to give your friend life interest in the property in your will – and your friend could do the same for you. It's unlikely that your respective families would want to contest such a request.
Joint bank account
To help you manage your mortgage repayments, you and your friend might take out a joint bank account. If one of you dies before you close the account, all of the funds in the joint account will belong to the surviving friend.
The money isn't counted as part of the deceased person's 'estate'. That means the administrator or executor won't need a probate or letter of administration to access the money. You'll just need to supply the bank with a death certificate in order to transfer the money to you.
Thinking about getting a joint bank account for you and your friend? You could consider an alternative bank account like the joint thinkmoney Managed Current Account.