Joint mortgage versus joint ownership: what you need to know about a joint home

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Understand your rights when buying a home with another person. (iStock)

The fact that two people apply for a home loan together does not mean that both people own the property. The converse is also true: a property can have co-owners if one party is not listed on the mortgage. It is important that all participants understand the difference between a joint mortgage and a joint property.

In a joint mortgage, both parties have equal financial responsibility for the home, but this does not mean that they both have equal ownership rights. For example, a parent can take out a joint mortgage with their child to help them buy a home. However, they are not automatically specified in the document. Only the persons named in the title deed for the house and in the document have the title to the property.

Alternatively, the couple can get married after one person becomes the owner of the house. The owner could add his spouse to the document. This would make the spouse a co-owner, but they would not be a participant in the joint mortgageand they are not (legally) financially responsible for the house.

If you’re looking into a joint mortgage, you can explore home loan options in minutes by visiting Credible to compare rates and mortgage lenders. Check out Credible to pre-qualify today

What is a Joint Mortgage?

A joint mortgage is a home loan that is given to several people. BUT mortgage lender will review the income, credit history and job status of all applicants. All parties provide personal information and sign the final loan documents.

While many people think of married couples when they talk about joint mortgages, this is not always the case.

For example, two roommates can take out a joint mortgage on real estate. Investors could get a joint mortgage together, or parents could take a joint mortgage with their child.

If you are considering a joint mortgage use online mortgage calculatoras a free tool offered by Credible to determine the purchasing power of your home and what your potential monthly mortgage payments will look like.

A joint mortgage offers many benefits, including:

  • The loan is approved on a two-income basis, which increases the chances of approval.
  • Opportunity to apply for a large loan amount.
  • The ability to qualify for a lower interest rate.
  • The financial responsibility for a home loan is shared between several parties.

While a joint mortgage has many advantages, there are some disadvantages to consider:

  • The mortgage application takes into account credit rating and the history of all buyers. This could potentially lead to an increase in the interest rate.
  • If your co-borrower does not pay their share, you may be on the hook for the entire purchase and / or face potential credit and legal problems if you are unable to maintain the mortgage payments.
  • Joint mortgage does not mean joint ownership. This could lead to discord and confusion.
  • If a quarrel arises between the parties over a joint mortgage, complications may arise when handling real estate.

If you are thinking of buying a property, visit online mortgage broker like Credible to receive customized mortgage rates and pre-approval letters without affecting your credit rating.

What is joint ownership?

Joint ownership means that more than one person has ownership of the property. There are several options for co-ownership, including:

1. Tenants in general: This type of joint ownership applies only to legally married couples. In this agreement, the couple is treated as one person. Ownership passes to the remaining partner when the other dies.

2. Joint lease: A joint lease allows more than one person to share equal property rights. When one owner dies, ownership passes to the surviving tenant (s) by inheritance.

3. Communal property: Joint ownership agreements are similar to joint leases. Both parties have equal rights to property while married. However, when one person dies, his belongings are subject to the will of the deceased. Each party may, but is not required to, transfer its half of the property to a spouse. They could have left half of the property to a child or someone else.

4. General rent: A joint lease allows two people to have ownership of the property, but they do not have to be equal. For example, several investors may have a common lease, with one investor owning 50% of the property and two others holding the remaining 50%. This type of ownership can be used to create timeshares.

Joint ownership benefits:

  • Both sides are confident that they will not care where to live if the co-owner dies.
  • The parties that participate in the joint ownership are entitled to any rental income or other profits from property

Some of the downsides to co-ownership include:

  • There may be problems with divorce or if the dying person owns someone else.
  • Some joint ownership options can complicate taxes and tax liability.
  • If one party is in debt to creditors, the other owner may face potential problems even if they do not benefit from the debt.

Ready to make your home purchase? Explore your mortgage options by visiting Credible compare rates of mortgage lenders.

Have a financial question but don’t know who to contact? Email the Safe Money Expert at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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