How Interest Rate is Determined for a Joint Mortgage

A joint mortgage interest rate typically considers the income of both applicants but uses the credit of only the highest earner. This can work for you or against you when you apply jointly for the funds needed to purchase a home. The option to elect a joint mortgage is most commonly used for married couples looking to share in the ownership of a property. Through this structure, both parties share equally in the debt of the home. To find out whether the structure will benefit you, ask yourself a few questions about your financial situation.
Who is the Highest Earner?
The first consideration is to determine which of the two applicants has the highest income. Income is considered on a mortgage application as a way to set the limits of the loan. Income will not directly affect the interest rate, so two people with very different incomes could qualify for the same rate theoretically. The person with the higher income, however, will be able to get a bigger mortgage since he or she can afford to pay more monthly. With a joint mortgage, two salaries are added together to increase loan limits.
How Much Combined Debt do You Have?
Income never exists in a bubble on a mortgage application. It is always expressed in comparison to debt, since this will affect how much liquidity a person atually has each month. Consider a person who earns $5,000 a month but already has $2,000 in debts each month. Another borrower earning $3,500 a month but only having $200 in debt payments would actually have more liquidity. With a joint mortgage, the debts of both borrowers will be added together and subtracted from the combined income to set limits.
Who has the Higher Credit Score?
This is where the higher earning borrower will have to stand alone. If the person who earns the most income in your joint arrangement also has the highest credit score, then the scenario will work well for both of you. The other borrower can add his or her income to increase limits even if the credit score is worse without any penalty. Typically, a person with a higher income will have a higher credit score, but not always. If the higher earning individual on your joint mortgage has a lower credit score, you may have difficulty determining the best course of action.
Could a Single Mortgage be Preferable?
It is possible the best scenario would be for the one person with the lower income to apply as a single borrower. You must understand this means your limits will be much lower. However, if you can save for a very high down payment using both income sources, the lower limits may be manageable. This is a particularly relevant option if the income of the two borrowers is very similar. If the low income, high credit borrower on your joint mortgage has a much lower income, then you may benefit from simply taking the higher interest rate on the loan in order to get the limits you need.
A joint mortgage interest rate typically considers the income of both applicants, but uses the credit of only the highest earner. This can work for you, or against you, when you apply jointly for the funds needed to purchase a home. The option to elect a joint mortgage is most commonly used for married couples looking to share in the ownership of a property. Through this structure, both parties share equally in the debt of the home. To find out whether the structure will benefit you, ask yourself a few questions about your financial situation.
Who is the Highest Earner?

The first consideration is to determine which of the two applicants has the highest income. Income is considered on a mortgage application as a way to set the limits of the loan. Income will not directly affect the interest rate, so two people with very different incomes could qualify for the same rate. The person with the higher income, however, will be able to get a bigger mortgage since they can afford to pay more monthly. With a joint mortgage, two salaries are added together to increase loan limits.
How Much Combined Debt do You Have?

Income never exists in a bubble on a mortgage application. It is always expressed in comparison to debt  because this will affect the amount of liquidity a person has each month. Consider a person who earns $5,000 a month but already has $2,000 in debts each month. Then, consider another borrower earning $3,500 a month, but only has $200 in debt payments. The lower income earner has more liquidity. With a joint mortgage, the debts of both borrowers will be added together and subtracted from the combined income to set limits.
Who has the Higher Credit Score?

If the person who earns the most income in your joint arrangement also has the highest credit score, then the scenario will work well for both of you. The other borrower can add his or her income to increase limits even if the credit score is worse without any penalty. Typically, a person with a higher income will have a higher credit score, but not always. If the higher earning individual on your joint mortgage has a lower credit score, you may have difficulty getting a low interest rate.

Could a Single Mortgage be Preferable?

It is possible the best scenario would be for the one person with the lower income to apply as a single borrower. Your purchasing power will be significantly lower. However, if you can save for a very high down payment using both income sources, the lower limits may be manageable. This is a particularly relevant option if the income of the two borrowers is very similar.