Co ownership - Tenant in common loan

I considering purchasing an investment property with a friend as tenants in common, My understanding for properties held in tenants in common, the whole property needs to be put forward as collateral, not just a share. Is this correct or are there exceptions?

If yes, case it seems my friend will need to guarantor my loan, which they would be happy to do. Lately it seems banks have become conservative about guarantees. Is it permissible by banks for them to guarantor my loan (security only)? Will the % split matter? Will legal advice be required?

 

Yes the whole property is used as collateral and you are each liable for each other's portion of the debt. While you are essentially guaranteeing each other's 'loan' it's not a separate guarantee or separate loan portions. It's one loan that you are each jointly liable for.
The property ownership % doesn't relate to the loan as such.
Recommend you speak to a broker before applying and don't just go direct to the lender.

 

Thanks for your response. I should clarify my friend will be buying via cash and not borrowing. This means I am not providing a reciprocal guarantee for them.
The reason I ask about about % share is, if my friend owns 1% of the property and guarantees my whole loan, my friend would be taking a huge risk for a small share of the property. My assumption is that it would not be viewed favorably by the bank?

 

Technically a tenant in common could mortgage just their interest in the property, but practically speaking there are no lenders that would do this. They would need to mortgage the whole property and to mortgage a property all owners would need to agree - hence the guarantee.

 

The risk for your friend is IF you fail to make the loan repayments the bank can sell the property to recover their cost, yes it's a big risk for your friend to guarantee your loan, regardless of the ownership % but I get your point that it would look even worse if your friend only owned 1% of the property. In the lender's view you would need to be able to explain the mutual benefit of that ownership structure.