Link to this page Print RSS  

Joint Mortgage Vs Joint Ownership

When people hear the term “joint mortgage”, they typically think it applies only to married couples. However, that’s not always the case. A joint mortgage can also apply to two or more people who may be family, friends, or business partners purchasing a home for either personal or investment purchases.

Applying for a joint mortgage has several advantages, including increased buying power, the ability to qualify for a larger mortgage, and improved eligibility for a loan. For those with lower incomes or credit issues, a joint mortgage can greatly improve their mortgage options. When two or more people apply for a mortgage together, the lender usually looks at the credit rating and history of the person with the highest income before deciding whether to approve the loan and what the terms will be. A blended score may be considered, but this is less common.

However, a joint mortgage is not the same as joint ownership. Ownership of the home is determined by the deed, not the mortgage. A joint mortgage only means that both applicants are responsible for repaying the loan—they do not both have to be listed on the deed as owners. In the case of a separation or termination of partnership, one party typically signs a quitclaim deed handing over ownership to the other, but that doesn't abdicate their responsibility for the joint mortgage.

Joint mortgages mean each party is held equally financially responsible for repaying the loan, and the payment records are applied to each person's individual credit history. While there are definite advantages to applying for a joint mortgage because of combined income and credit scores, it is important to understand how the ownership of the property is deeded. Although theterms of the loan are based on the credit of the applicant with the highest income, both parties are equally responsible for the entire loan. For example, if your partner on the joint mortgage has a month of hardship and is unable to make their payment, you must cover the entire amount--otherwise it will be listed as a missed payment on both credit histories.

Because of this fact, it's extremely important to understand what will happen if one of the owners wants out of the mortgage. Always speak to an attorney prior to entering into a joint mortgage, and have an agreement drawn up that will clearly state how to proceed if this situation occurs. Typically, the loan must be refinanced into a new loan that is only in the name of the partner who wants to remain an owner.

A joint mortgage can be very beneficial, but it’s important to understand all the aspects before entering into one. An attorney and your lender can help you prepare for any unexpected pitfalls.

Link to this page Print RSS