Tenants In Common And Joint Tenants

Especially in the case of first-time buyers, people choose to purchase properties with their friends or partners. This helps them reduce the deposit paid by each individual and increases the amount they can borrow. While most people choose to partner with one other individual, it is possible for up to 4 individuals to be legal owners of a property.

However, confusion between Tenants in Common and Joint Tenants is common when it comes to joint ownership. If you are planning to share the ownership of a property you purchase, it is important to understand whether you should go with Joint Tenants or Tenants in Common.

What are Joint Tenants?

Joint Tenants are individuals all owning 100% of the property they live in. Here, all tenants have the equal and absolute ownership of the property. In a court of law, all joint tenants are considered a single owner of the property they purchase. If you want to purchase a property with this arrangement, you will need a single joint mortgage to cover the cost.

In the case of Joint Tenants, it is important for all tenants to mutually agree if they need to sell the property. According to the “right of survivorship,” the property’s ownership automatically passes on to the surviving tenant(s) if a tenant passes away. In most cases, married couples choose to buy properties as Joint Tenants.

What are Tenants in Common?

Tenants in Common are the tenants who own specific shares of the property they live in. These shares may or may not be equal in size. Unlike joint tenancy, there is no absolute owner of the property in the case of Tenants in Common. For example, an individual may purchase a property with 50% of the share to themselves and the remaining 50% divided equally between their two children. Here, the tenancy in common will have three shares worth 50%, 25%, and 25% each.

This arrangement is often preferred by friends or relatives buying properties together. Like Joint Tenants, all Tenants in Common need to agree mutually before selling the property they live in. However, if a tenant passes away, their share is not automatically divided amongst the survivors. It passes on to the individual they specifically mention in their will.

What is the difference between Joint Tenants and Tenants in Common?

Here are a few important aspects to consider to understand Joint Tenants vs. Tenants in Common better:

Division of ownership

In the case of Joint Tenants, the property ownership is equally divided between all tenants. Here, every tenant is 100% the owner of the property. On the other hand, Tenants in Common do not equally share property ownership. Here, every tenant owns a specific share of the property they live in.

Transfer of share

In the case of joint tenancy, a tenant cannot choose to transfer their share to whomever they want. It is automatically transferred to the surviving tenant(s) after their death. On the other hand, the Tenants in Common arrangement allows a tenant to transfer their share to whoever they want to through their will.

Getting a separate mortgage for the share

Joint Tenants cannot get a separate mortgage for their shares. They need to take a single mortgage for the entire property. However, Tenants in Common can get separate mortgages for each of their shares. While this is theoretically possible, most mortgage lenders do not prefer such a condition as they consider it to be a risky venture. If you belong to tenancy in common and want a mortgage for your share, you can always work with your mortgage broker to find the right lenders in the market.

Common Buyers

Joint Tenants are most partners or spouses willing to purchase a house with equal ownership. Tenants in Common are often relatives or friends willing to purchase a property together, with everyone buying a share as per their purchasing power.

What is a joint mortgage?

A joint mortgage is a mortgage taken by two or more individuals for the same property. Whether you want to go the way of Joint Tenants or Tenants in Common, you will need a joint mortgage to purchase a property.

While most joint mortgages involve two people, most mortgage lenders allow up to four individuals to take a joint mortgage. If more than four borrowers want to get this mortgage, lenders would often consider the income of the two highest-earning individuals from the group while processing their application.

Joint mortgages have their own sets of pros and cons. The biggest advantage of getting a joint mortgage is that it allows you to borrow more as the deposit is shared and income is pooled together. However, the major shortcoming of this mortgage is that everyone is equally responsible for making the repayments. If your partner fails to pay their share, you may have to cover for them.