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A Guide to Joint Mortgages


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TERMINOLOGY

Joint mortgages can provide you with a solid opportunity to purchase a home. This type of mortgage works differently from a mortgage you would use if buying a home as an individual. Here are the basics of joint mortgages and how they work.

Joint Mortgages

A joint mortgage is a type of mortgage that allows two or more individuals to purchase a home together. They will all fill out a joint mortgage application at the same time with the lender.

Increased Income

One of the major benefits that you will receive by using a joint mortgage is that you get to count more income towards the purchase of a home. Since you have two or more individuals purchasing a home, the lender is going to evaluate the loan application based upon the income of all of the parties involved. This is going to increase the chances of getting approved for your loan, and it will allow you to purchase a larger home than you would be able to individually. As a general rule, you will be able to borrow approximately 3 times the income of the primary earner and half of the other individual's income. Some lenders will take both incomes and add them together and then multiply by 2.5. Regardless of which method is used, you will be able to borrow quite a bit more money with this technique.

Credit Considerations

Using a joint mortgage will also help when it comes to getting approved based upon your previous credit history. When you apply for a mortgage on your own, the bank is looking at only your credit score and credit history. When you apply for a joint mortgage, the lender is going to evaluate both parties' credit histories together. If one of the individuals has a low credit score, it can be made up for with a high credit score from the other individual. This can also help you get a better interest rate than you would be able to get alone.

Joint Tenancy

Joint tenancy is one way that you could choose to hold the property once you obtain a joint mortgage. This is very common with married couples. With this arrangement, the parties in the joint mortgage have equal shares in the property. If one of the individuals were to pass away, his or her share in the property would then be transferred to the other party.

Tenancy in Common

Tenancy in common is another common way that property is held jointly. This type of arrangement is common with friends or family members who choose to purchase a property together. This method of holding a property also provides all parties with equal shares of the house. However, with this method, if one of the individuals dies, his or her share of the house does not necessarily go to the other owner(s). It would go to whomever the individual's will specifies to receive it.