Joint Mortgage on One Income

Joint Mortgages on One Income: Challenges and Solutions

Life can take unexpected turns, and sometimes you might find yourself needing to secure a mortgage with only one income.

Whether your partner is temporarily out of work, pursuing studies, or dedicating their time to managing the household, the prospect of applying for a joint mortgage on a single income can seem daunting. But is it possible? The good news is that it can be. However, there are specific challenges and considerations you need to be aware of when taking a mortgage.

At Kerr & Watson, we specialise in helping clients with their mortgage options, ensuring you find the best possible solution for your unique circumstances.

On this page we explore how joint mortgages work when only one income is in play, the potential challenges, and how our expert guidance can make all the difference.

How Does a Joint Mortgage with One Income Work?

A joint mortgage with one income functions similarly to a traditional joint mortgage where both applicants contribute financially.

The key difference is that in this scenario, only one party’s income is considered in the affordability assessment which may make the other applicant be considered ‘a dependent’ in the eyes of the lender. You can utilise our affordability calculator to give you an idea of affordability.

The other applicant, who may be unemployed, retired, or a stay-at-home parent, will still be named on the mortgage but may not contribute financially, although they will still be liable for making sure it gets paid between both applicants.

Here’s what to expect:

Affordability Assessment

The lender will scrutinise the sole earner’s income, expenses, and overall financial stability to determine how much they are willing to lend. The total household expenditure, including the non-earning partner’s costs, will be considered as they likely do not have an income coming in.

Income Multipliers

Typically, lenders calculate how much you can borrow based on a multiple of your annual income. While the exact multiple can vary widely, as a rough guide over a long term, it’s often around 4 to 5 times your income. However, with only one income, you might find that the amount you can borrow is less than if both parties were earning.

Expenditure and Dependents

Lenders will also factor in household costs and the presence of any dependents, such as children. This can further reduce the amount you can borrow as it impacts your disposable income.

Challenges of Securing a Joint Mortgage on One Income

While it’s possible to secure a joint mortgage with only one income, there are certain challenges you might face:

Reduced Borrowing Power

The most immediate challenge is the potential reduction in borrowing capacity. With only one income being considered, the amount you can borrow is typically lower than if both applicants were earning. This could limit your property options, especially in areas with higher house prices.

Stricter Affordability Criteria

Lenders tend to be more cautious when assessing joint mortgage applications with only one income. They’ll carefully examine whether the sole income earner can comfortably cover the mortgage repayments and other living expenses.

Impact of Credit History

If the sole income earner has a strong credit history, this can work in your favour. However, if there are any blemishes, such as missed payments or outstanding debts, this could impact the lender’s decision. Additionally, the non-earning partner’s credit history can also influence the application, as both parties will be financially linked through the mortgage, even if they do not plan on paying towards the monthly payment.

Should You Apply for a Single Applicant Mortgage Instead?

Given the challenges of securing a joint mortgage with one income, you might be wondering if it would be better to apply for a mortgage in just one name. While this might seem like a simpler option, there are a few things to consider:

Property Ownership

If you apply for a mortgage in your name only, the property will also be solely in your name. This can have legal and financial implications, particularly if you are purchasing the property with a partner. Joint ownership ensures that both parties have legal rights to the property. Many lenders insist that both parties go on a mortgage, especially if they are married or both contributing towards the deposit.

Affordability

A single applicant mortgage might provide better borrowing power in some cases, but it could also limit the amount you can borrow, especially if the lender still considers the entire household’s expenditure. Talk to a qualified mortgage adviser for individual advice.

Long-Term Implications

If your circumstances change, such as getting married or having children, having only one name on the mortgage and property deeds could complicate matters in the future and result in further costs.

How Kerr & Watson Can Help

The mortgage market can be challenging, particularly when you’re applying for a joint mortgage on one income and are facing challenges around affordability.

This is where Kerr & Watson’s expertise can make a significant difference. We take the time to understand your unique situation and tailor our advice to help you find the best possible mortgage deal.

Conclusion

Securing a joint mortgage with one income is certainly possible in some cases, but it requires research and planning to work out which lenders may be available to lend to you.

If you’re considering a joint mortgage on one income, or if you have any questions about your mortgage options, contact Kerr & Watson today.