The term ‘tenants’ is typically used in the context of renting, but when we talk about joint tenants and tenants in common, we’re talking about shared homeownership.
Here’s everything you need to know about what joint tenants and tenants in common mean and what the difference is between the two.
What does joint tenants mean?
Joint tenants each have equal rights to the entirety of the property. Your joint tenancy can include up to four tenants, but there are some potential issues to be aware of.
Legally, joint tenants are viewed as a single entity, which means there’s one mortgage shared between you and therefore you must sell the property together should you decide to move. Integrally, in the event that someone dies while in a joint tenancy, the property will automatically be left to the other owner. This is known as the ‘right of survivorship rule.’
This is an important thing to consider before committing to becoming joint tenants, as this means that you cannot pass on ownership of the property to your loved ones in your will.
Related: How to house share harmoniously
Tenants in common
Tenants in common own a separate percentage share of the property, and the size of the shares can vary. This exact split is confirmed via a legal agreement, and when the home is sold, any proceeds from the sale will be allocated according to each person’s share.
Shares in the property can be renegotiated and changed by the tenants in common. For example, someone with a 25% share in the property could increase it to 30% if the other party agrees to this.
Related: Buying a house with a friend
Joint mortgages
If you want to buy a property with a partner, a friend, or a relative, you can do so by taking out a joint mortgage. This specialised mortgage spreads the financial responsibility between the parties and establishes joint ownership of the property. Joint mortgages can be used for both joint tenants and tenants in common.
What are the risks of a joint mortgage?
In a joint mortgage, you won’t have sole financial responsibility for the property, and therefore you will have less control as a homeowner. For example, if the person you’re buying with has a poor credit history, this could impact how much you’re able to borrow.
You should only ever take out a joint mortgage with someone you have known for a long time who is trustworthy and responsible. If the person you’re sharing with fails to keep up with mortgage repayments, you could be at risk of having your home repossessed.
What are the advantages of a joint mortgage?
Arguably the biggest advantage of joint mortgages is that they could boost your lending potential. Lenders will base their decision on your joint income, and therefore it could be easier to get on the property ladder if you take out a mortgage with someone else.
Related: Why it’s so important to plan your finances before moving
What are my rights under joint ownership?
As joint owners, each person is classed as the legal owner of the property, and therefore no one can be forced to leave without a court order. The property also cannot be sold without the agreement of all parties, which means you will need a court order to sell if the people you’re living with do not agree to it.
What is a Deed of Trust?
A Deed of Trust is an important legal document which details how much money each person has contributed towards a property purchase. It will also provide clear details about what should happen to the asset if circumstances change.
Drawing up a Deed of Trust could be an essential for tenants in common as this provides a safety net for your financial ties to the property. It also minimises the risk of miscommunication and disputes, which can get messy when a huge amount of money is at stake.
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