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Joint mortgages are a great option for people wanting to get a mortgage together, allowing multiple buyers to split the loan. Whether you’re applying with a friend/family member or your partner, joint mortgages make your application stronger.
Here’s what you should know about joint mortgages and whether or not they’re a good idea for you.
What Is a Joint Mortgage?
A joint mortgage is when two or more people go into a mortgage together, pooling their finances in order to qualify for a better home. You are both responsible for making payments in a joint mortgage, but that doesn’t necessarily mean that you’re both on the title and officially own the property.
Choosing to buy a house with a joint mortgage just means that you are both responsible for payments on the mortgage, and both of your assets, incomes, and credit scores can be looked at as qualifiers for the loan. This allows people who want to get a mortgage together to qualify for bigger loans with more favorable terms, whether it’s a couple, friends, or family.
So how do you go about getting a mortgage or buying a home with two or more people? There are two main ways to do it—either through a joint mortgage or by joint ownership.
In a joint mortgage, both parties are signatories to the mortgage and are equally responsible for making payments. In joint ownership, the mortgage may be in only one person’s name, but both parties have their name on the deed and contribute toward making payments.
The difference lies in who’s responsible for the mortgage and who owns the title/deed. “Joint mortgage” refers to the joint financial responsibility to the lender, while “joint ownership” refers to the shared ownership of the home based on who’s on the title/deed. Borrowers who go in on a joint mortgage together usually have joint ownership, but not necessarily.
Requirements for a Joint Mortgage Loan
The requirements for a joint mortgage are mostly the same as a regular mortgage. These include a good credit score of 620 or higher for most loans, a favorable debt-to-income ratio of 40% or lower, and a down payment somewhere between 3% to 20%, depending on what the lender allows, the type of loan you’re getting, and whether or not you want to pay private mortgage insurance (PMI).
Whose Credit Score Is Used in a Joint Mortgage?
When two people apply for a mortgage together, the lender typically considers the credit rating and history of the person with the highest income in deciding whether to issue the loan and what the terms will be. In some cases, a blended score may be considered, but this is less common. This makes a joint mortgage a particularly good option for couples when one spouse has bad credit.
While the terms of the loan are based on the credit of the partner with the highest income, both partners are equally responsible for the entire loan. You’re not just each responsible for coming up with your part of the loan each month—if your partner comes up short, you’re fully responsible for covering the difference.
Because some lenders do use blended credit scores and income data, couples doing a joint purchase will sometimes apply for a mortgage in one partner’s name only—the partner with the higher credit rating and income. They then put both names on the deed (although only one remains on the mortgage itself), and both contribute toward the monthly mortgage payment. However, this only works if the one partner can fully qualify for the mortgage by himself or herself, and you probably won’t be able to borrow as much as you would if both incomes were listed on the mortgage.
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Pros and Cons of a Joint Mortgage Loan
How do you know if a joint mortgage is right for you? Here are the pros and cons of getting a joint mortgage instead of applying separately for your own loan.
- More buying power: When you’re applying with someone else, you get to pool your income to qualify for bigger loans.
- Easier qualification: One of the parties also benefits from getting better mortgage terms than they would on their own, as the lender usually looks at the borrower with the best credit score.
- Shared financial responsibility: The burden of mortgage payments, property taxes, and other homeownership costs is distributed among multiple individuals, making it more manageable for each borrower.
- Shared financial risk: Borrowers are jointly responsible for the mortgage, and financial issues or default by one party can affect the credit and financial stability of the other borrower, who is still on the hook for making payments.
- Ownership problems: You’re both financially responsible for making payments on the mortgage, but that doesn’t mean you’re both owners of the home. If only one of you is on the actual title, the other borrower doesn’t have ownership over the home they’re making payments for, which can be a point of contention. This could even result in a scenario in which the technical owner wants to sell the house, and the other borrower doesn’t get a say if they’re not on the title, even though they’re still financially responsible.
What Happens to a Joint Mortgage When Someone Dies?
There are a few things that can occur when someone on a joint mortgage dies, depending on the situation.
Scenario #1: If the borrower who died didn’t have their name on the title, the home still belongs to the borrower who owns it, and they continue to make payments in full to the lender. This means the surviving borrower will have to pick up on increased payments to continue owning the house.
Scenario #2: If the borrower who died was the only one with their name on the title, that doesn’t mean the surviving borrower automatically becomes the owner of the house. They still have a financial responsibility toward the mortgage, but the title could go to a family member or someone else based on the deceased borrower’s will. For situations like these, you’ll want to make sure in advance that the title goes to the other borrower in the event of the title owner’s death—especially if the co-borrowers aren’t related.
Although widowed persons typically inherit their late spouse’s property automatically, partners sharing joint ownership typically don’t inherit their partner’s share in the property unless it’s specifically spelled out in a will. Even in the event of a joint mortgage, a surviving unmarried partner could end up losing their partner’s share to blood relatives unless their partner specifically left the property to them in a will.