3 Advantages of a Joint Mortgage

A joint mortgage simply means two people are listed as borrowers on the mortgage loan. Joint mortgages are commonly used among spouses, but they may be used by any two people who live together. Typically, a lender will set rules regarding the nature of the relationship in order to ensure the mortgage is stable. One person may retain the deed to the home despite a joint mortgage; you may also elect to have joint ownership. Ultimately, joint mortgages provide for a number of key advantages.

#1 You can Combine Incomes

The main reason people apply jointly for loans is to list their income combined on the application. Instead of only listing the income of the highest earner, most will be able to nearly double their listed income by applying jointly. Mortgage lenders have restrictions on debt to income ratios. By increasing your income on an application, you can increase the size of the mortgage you will qualify for.

While incomes are combined, the mortgage company typically lists one primary borrower and one co-borrower. The primary borrower has the higher income. In addition, the primary borrower's credit score is usually the main consideration for interest rate.

#2 You Build Both Credit Scores

When two people are listed on the mortgage loan, both people will have the debt applied to their credit score. If the mortgage is paid off successfully, both people will reap the rewards in terms of a much higher credit rating.

Paying off installment debt is the fastest way to increase a credit score. In fact, it is very difficult to ever reach the highest areas of a credit rating without paying off a large installment loan. For most people, a mortgage loan is the largest they will ever take. This means it will harm the co-borrower on a joint mortgage if he or she is not listed on the loan by preventing the person from receiving the most beneficial credit rewards possible. Thankfully, a joint mortgage allows both parties to share in the benefits, even if one party is carrying the large amount of the payments.

#3 Legal Provisions Prepare for Unfortunate Circumstances

The main reason many people are afraid of joint mortgage debts is because they are unsure what will happen if the partnership they share does not last. Death and divorce are the two greatest concerns for most joint mortgage applicants. It is important to know there are legal provisions in place to deal with both of these issues.

Most joint mortgages allow for a survivor to gain full ownership of a house if a partner or co-borrower passes away. If this provision is not in the mortgage, the issue may be settled in probate court rather easily. Divorce is slightly more complicated. The two parties can decide which would like to relinquish ownership. If a mortgage is still active, they two parties can elect to pay it off, according to their own plan. Typically, couples will choose to sell the home and split either the debt or the profits if they cannot reach an arrangement.