What is a Joint Mortgage?

A joint mortgage is a lending instrument that is used to allow multiple parties to purchase a property. With a regular mortgage, the lending decision is made based on your creditworthiness. With a joint mortgage, the lender will look at all parties involved before they make a decision.

How it Works

With a joint mortgage, you are making a decision to buy a piece of property with someone else. It could be one other person or multiple parties. When you buy the property, you will both own it equally. You will have equal rights to the property and you will also have an equal financial responsibility to the mortgage. Therefore, all the parties involved will have an equal share in making the mortgage payment.

The qualification for the mortgage will depend on all of the parties involved. The lender will pull all of the credit files and evaluate them as a group. They will look at the income of the group instead of the individual. This type of arrangement is very common with married couples as they both own the property. With a marriage the deed is held in a joint survivorship. This means that if one person dies, the rights to the house go to the other person.

If you were to buy a property with friends or business partners, the deed would be set up differently. These arrangements are known as joint tenants in common. When one party dies, the rights of that portion of the property go to that person's heir.

Benefits

A joint mortgage presents many benefits compared to an individual mortgage. For one thing, you will be able to buy a bigger or more expensive house as a result. When you have multiple parties applying for a mortgage, it increases the amount that you can borrow. There is more income coming in and there is more credit history to evaluate. With more income coming in, the bank knows that you can afford a bigger monthly payment. Therefore, they will often extend more credit as a result.

Another benefit is that it allows you to come up with a bigger down payment. If you are strapped for cash, your partner might be able to come up with more money. You can pool your money together which will also help your chances of getting approved for the loan that you need.

Potential Issues

While joint mortgages can help you secure property easier, they do have some potential problems. If the relationship between you and your partner becomes strained, you could run into financial difficulties.  If one person wants to leave the relationship, it can result in a buyout of the other person's share.

Another possible problem is when one person in the agreement fails to meet their financial obligation. If they lose their job or their source of income, the other person might be forced to pick up the slack. This can present unnecessary stress to the parties involved and cause more tension.