What Is A Joint Mortgage, And Should You Get One?

If you’re concerned you might not qualify for a mortgage on your own, you might consider teaming up with one or more other parties on your application. Known as a joint mortgage, this sort of home loan operates pretty much like any mortgage, but it also has some unique features. Here’s a closer look at how joint mortgages work, and how to qualify for one.

What is a joint mortgage?

A joint mortgage allows two or more parties to combine their assets and income when they apply. “[It] commonly involves two people — usually spouses, joint partners, friends or family members — who pool their income and assets together to buy a home,” says Ralph DiBugnara, president of Home Qualified and VP of New American Funding in New York City.

How does a joint mortgage work?

With a typical mortgage, your name alone is put on the application, making you solely responsible for repaying the loan. With a joint mortgage loan, all parties involved are legally responsible for paying back the loan and following its terms.

The names of those on a joint mortgage application and its accompanying loan documents indicate the parties who will be obligated to repay the debt. Joint mortgages don’t necessarily mean joint ownership of the home, though. Ownership is determined by the names on a home’s title. If a party shares in the joint mortgage, but isn’t added to the home’s title, that party might have no ownership claim to the property — but would still be responsible for repaying the debt on the property.

Whose credit score is used on a joint mortgage?

Typically, lenders review the credit scores of all co-borrowers on the application.

“Some lenders are more flexible than others if the credit score of one of the parties is lower than the other,” says Mark Shepherd, founder of Shepherd Financial Partners in Boston. “They might favor the higher credit score in their evaluation of the application. But other lenders may increase the interest rate if the lower credit score causes enough concern.”

Joint mortgage requirements

There are some requirements to keep in mind if you’re considering a joint mortgage application:

• All parties must be over the age of 18
• The mortgage lender must permit joint mortgages

Also, applicants must meet the mortgage underwriting criteria laid out by that particular lender. The specifics of those joint mortgage requirements vary by lender but usually include:

• Being at or below the lender’s debt-to-income (DTI) ratio limits
• Not exceeding the lender’s loan-to-value (LTV) ratio limit, which means putting down a big enough down payment and having the house appraise at or above the purchase price
• Meeting or exceeding the lender’s minimum credit score requirement
• Having sufficient steady income to manage the mortgage payments

What are my rights on a joint mortgage?

It’s crucial to understand your obligations and rights when you enter into a joint mortgage agreement. Talk to a real estate attorney to address what happens if a co-borrower wants to sell, passes away or can’t repay their portion. If you’re buying with a spouse, you might also ask what happens in the event of a divorce. This way, everyone knows what to expect if any of these circumstances occur.

If a co-borrower wants to sell

“If one co-borrower wants to sell the property while the others don’t, they can’t sell without permission from the others,” says Chris Cohen, chief product officer for Austin, Texas financial firm Kasasa. “If an agreement isn’t reached, the co-borrower can buy out the other parties at an agreed-upon price, sell their ownership stake to someone else or settle the matter in court and force a sale.”

If a co-borrower passes away

When a co-borrower on a mortgage dies, the repayment terms of the loan do not change — the surviving borrower(s) will still be responsible for making payments on time. The lender should also be notified immediately to remove the deceased person’s name from the loan.

If the deceased borrower had a will in place, the surviving borrowers may need to sort out whether an heir will be involved in the property.

“In some cases where the joint mortgage doesn’t have terms that automatically pass the loan on to the surviving parties, the matter may need to be resolved in probate court, where a judge will determine the next steps for the co-borrowers and the lender,” says Cohen. “If the co-borrower can’t afford to pay back the loan, the judge may request a loan refinance or have the surviving parties sell the property.”

If a co-borrower can’t afford payments

In this regard, joint mortgages are no different from other home loans. If one or more of the parties on the joint mortgage can’t repay what was borrowed, it’s important to talk to the lender as soon as possible. Sometimes, they can work out an agreement with you (e.g., mortgage forbearance).

If you stop making payments beyond the lender’s grace period, you risk going into foreclosure. What happens next depends on your state, but it usually means the lender can take the house and sell it to recoup their losses.

Should you get a joint mortgage?

Consider these benefits and drawbacks before you decide:

Pros

• Qualifying for a larger loan: “The main benefit is the ability to purchase more of a home than you would be able to buy on your own,” says DiBugnara. “More income and/or assets equals the ability to borrow more money when it comes to obtaining a mortgage.”
• Easier to make ends meet: Being able to combine your wages and down payment savings not only increases your purchasing power, “it makes it easier to pay the mortgage due each month, allowing you to have more funds in your budget to save for future goals,” says Shepherd.

Cons

• Impact on borrowing power: Since it increases your overall debt, having your name on a joint mortgage might negatively affect your ability to obtain other loans, says Cohen.
• Your finances are tied to someone else’s: “If one party stops contributing, it could put the other party in an undesirable financial position,” says Melissa Gasparek of Guild Mortgage in Wisconsin. It’s best for borrowers entering into a joint mortgage transaction to “have a solid, long-standing relationship with each other built on trust to avoid any potential disputes down the line.”
• Forced sale or refinance: It can also get complicated if one party wants to get out of the joint mortgage agreement. “If the joint loan involves joint ownership — meaning all co-borrowers are listed on the title — one party could force a sale or refinance of the property even if the other party doesn’t agree,” says Gasparek.

Who is a good candidate for a joint mortgage?

A mortgage carries serious implications for your finances, so anyone contemplating sharing one with another person should feel confident that the other party is equally committed to submitting payments on time every month — and that both parties are committed to a long-term future of shared finances.

These are good examples of relationships that make sense for a joint mortgage:

• Legally married spouses
• Life partners who also share other financial responsibilities
• Anyone who plans to cohabitate and share maintenance responsibilities

Who is a bad candidate for a joint mortgage?

• People who don’t know each other well
• Partners whose relationship is shaky or on-again, off-again
• Couples where one borrower has poor credit (you’re better off with the name of the borrower who has better credit on the application alone)

How to apply for a joint mortgage

“If you can reasonably afford the full mortgage by yourself, it makes sense to eliminate complexity long-term by avoiding a joint mortgage,” says Cohen. But, if you decide to apply for a joint mortgage loan, here’s how to move forward:

1. Submit a loan application. To apply for a joint mortgage, each co-borrower needs to fill out and submit a loan application. Be sure to shop around with multiple lenders and compare interest rates before applying.
2. Provide supporting documentation. The lender will likely request many documents from all parties, including proof of income, savings, debt details and employment history.
3. Finalize the loan. Review and sign all necessary disclosures and paperwork at closing. Again, all parties need to be involved here and sign.

Keep in mind that the steps to originating joint mortgages will vary by lender, so be sure to ask for details. (How easy or hard the process is could influence your choice of lender.) Overall, though, have patience: “With a joint mortgage application, expect the overall lending process to take longer,” says Cohen.

FAQs

• How can you get out of a joint mortgage?
  

  Removing one co-borrower from a joint mortgage situation can be tricky. More than likely, the mortgage would need to be refinanced without your name on the new loan, which comes with closing costs — and the need for the remaining borrower(s) to demonstrate strong enough financials to handle the payments on their own. Of course, there’s always the option to sell the property and pay off the remaining balance, thus eliminating the mortgage altogether.

• Can an unmarried couple apply for a joint mortgage?
  

  Yes, people who are not married but want to purchase a home together can apply for a joint mortgage. This could include friends, siblings, parents and children or partners. As long as all parties are over 18 and the lender allows a joint mortgage, individuals who are not married can apply for a joint mortgage loan.

• How does a joint mortgage impact tax benefits?
  

  If you’re a co-owner of the home (your name is on the title and you’re paying a portion of the mortgage), then you can deduct your share of the mortgage interest on your federal tax filings. This assumes you opt to itemize your tax deductions, rather than electing the standard deduction.