The Question
My wife and I are currently in the process of buying our first home, but we are confused about whose names should go on the mortgage. As it stands, we have been gifted a deposit from my parents and I will pay the mortgage on my own.
My wife is currently not working because we have two small children. It’s more financially viable for her to stay at home and care for them, rather than use a nursery, as childcare costs would be more than her wages.
Should we therefore take out the mortgage in my name only or in both? As my wife won’t be contributing to the repayments and has no salary to offer it seems there is no point adding her to the documents. But could this cause problems down the line, especially when she returns to work? Thank you for your advice.
Darren’s Answer
Buying your first home is an exciting time but there’s no doubt it can be complicated, too. In short, the answer is that you can do both, but let’s break your question down.
This is a question we are often asked, especially with childcare costs at record highs. Taking out a mortgage in just your name is definitely possible. However, there are a few things to keep in mind.
Although your wife will not be contributing to the mortgage payments through income, there are some lenders who will treat her as a dependant, whether added to the mortgage or not as she does not have an income and will rely on your household income.
Many lenders will base calculations on figures from the Office for National Statistics (ONS), such as utility bills, food and other household expenses.
This may impact the amount you can borrow as essentially you have a second person’s living costs to cover.
When submitting the application, if you did this in your name only, lenders would assess affordability based on your sole income and credit history.
If you submit a joint application, your wife’s income will be £0 (unless there is any other benefit income that can be included in your wife’s name), but this will also assess your wife’s credit history and outgoings.
Lenders are generally cautious when assessing joint mortgage applications with only one income. They need to determine whether the sole earner can comfortably cover the mortgage repayments and other living expenses.
This is not to put you off doing this, it’s just something to be mindful of.
Please be aware that a lot of lenders will only allow one person to be on the property deeds if there’s only one on the mortgage. This is something to keep in mind to ensure the property itself is also in your wife’s name (even if the mortgage isn’t).
Now, in terms of the deposit. You are in a fortunate position having been gifted funds from family to support your purchase, but there are some points to remember on this.
Generally, most lenders will ask for the gifted funds to be in the names of those on the mortgage.
This means that a gifted deposit letter will be required to show evidence that the funds are a gift; this is then noted in both your names.
My advice would be to speak to a mortgage broker who can guide you through the process, in addition to pointing you in the direction of legal advice for the gift and property ownership.
This is something we brokers deal with every day, and we can support you throughout to ensure the process is as smooth as possible.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
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