Many clients wonder whether they should purchase a property in joint names, especially if they can afford it in a single name or if one partner does not have an earned income. Some mistakenly believe there are advantages to purchasing a property in a single name. Let’s explore why joint ownership is often the better choice and debunk some common myths along the way.
For married couples purchasing a residential home, joint ownership is usually the best option. As an adviser, I recommend starting with this as the default position.
All individuals listed on the property title must also be on the mortgage. If a couple decides to purchase the property jointly, both must be part of the mortgage. If there are challenges in adding a partner to the mortgage-such as poor credit history or visa restrictions preventing them from living in the UK-we explore alternatives. Only in cases where it is truly impractical to add a partner should purchasing in a single name be considered. Even then, we advise creating an action plan to add the partner to the mortgage when their circumstances improve.
Some clients mistakenly believe that if their partner is a homemaker or currently without an income, they cannot be added to the mortgage. This is incorrect. It is possible to add an applicant without an income, provided they meet other criteria such as age, credit profile, and the right to live in the UK.
A common misbelief is that purchasing a home in one partner’s name preserves the other’s First-Time Buyer status for future property purchases.
However, under UK homeownership rules and HMRC’s stamp duty regulations, if one spouse owns a property, the other is automatically considered a homeowner. This means they would not qualify for First-Time Buyer Stamp Duty Relief, and any future property purchase without selling the first home would be treated as an additional property, incurring higher stamp duty rates.
Married couples should not assume they can benefit from First-Time Buyer advantages by purchasing in a single name.
If a married couple purchases a property in a single name, additional legal steps are required in the event of the owner’s death. As estate planners, we have encountered cases where a deceased homeowner, despite being married with dependent children, held the property solely in their name due to poor or lack of advice. This created complications for the surviving spouse.
Had the property been purchased in joint names, it would have automatically transferred to the surviving spouse under survivorship rules providing the property is owned as joint tenants. (the default way of married couple owning joint properties —which is a topic on its own and is beyond the scope of this article).
From a tax perspective, joint ownership offers greater flexibility in managing both income tax on rental earnings and capital gains tax (CGT)
If the property is later converted into a buy-to-let, joint ownership provides tax advantages. Rental income can be split between both owners, potentially reducing the overall income tax liability. Additionally, when the property is sold, CGT may apply if it was not used as a primary residence for a period. In such cases, having the property in joint names allows both partners to utilise their individual CGT allowances, offering more efficient tax planning opportunities.
Unfortunately, relationships sometimes break down, leading to separation or divorce. In such cases, the courts assess various factors when dividing assets. A marital home registered in one spouse’s name does not necessarily grant them greater rights over the property. The other partner may still have legal claims.
This discussion applies to a residential home for a married couple. If one partner owned a property before the marriage and it is not used as the couple’s primary residence, joint ownership is not necessarily the best option.
If a couple has already purchased a home in a single name, it is still possible to add the other partner’s name to the title and mortgage. This can be done in two ways:
- At the time of remortgaging – If the mortgage is nearing the end of a fixed-term rate (e.g., after two or five years), the couple can apply for a joint mortgage and update ownership through a Transfer of Equity. It is normal to get a free solicitor for the remortgage who may then charge just for the transfer of equity.
- During an existing mortgage term – If the mortgage is not due for review, the couple can still add the other partner’s name. This requires obtaining the mortgage lender’s consent and working with a solicitor to complete a Transfer of Equity.
While some may believe there are advantages to purchasing a property in a single name, the reality is that joint ownership offers significant benefits, including estate planning simplicity, tax advantages, and clarity in case of relationship breakdowns.
Purchasing a property is a major decision, and poor advice can be costly. We urge all clients to seek professional guidance to ensure they make the right choice. At Nachu Finance, we take pride in offering transparent and holistic advice, earning the trust and recommendations of clients for over 18 years.
Making the right choice from the start can save you time, stress, and unnecessary costs. At Nachu Finance, we’re here to guide you every step of the way-get in touch today-we’d be happy to guide you in your homeownership journey the right way!
