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There are a few reasons for people to apply for a joint mortgage, and while it’s usually a married couple, it can also involve two or more people that may be family, friends or simply business partners.
Applying for a joint mortgage will typically result in having more buying power or improved eligibility for a loan. Arranging for a joint mortgage can increase the buying power for those that can’t qualify for a mortgage on their own, either due to credit issues or income deficiencies. It may also be sought for those who simply want to purchase a bigger property which would automatically mean a bigger mortgage.
It's important to note that a joint mortgage is not the same thing as joint ownership. A joint mortgage simply means that all parties involved are agreeing to the loan, and as such, each party is held equally liable, from a financial standpoint. The payment history is applied to each person's credit history, so it's important to understand that if one person or persons decide to stop making payments or make late payments, the financial responsibility will fall to the others listed on the mortgage to make up for these payments.
Joint ownership is how the property is deeded. There are two common ways to deed a property, the first being “right of survivorship.” This is done in situations such as with a married couple when sole ownership of the property reverts to the survivor. In this case, all that would be required is the original joint survivorship deed and the death certificate.
Another way that property might be deeded is joint tenants in common. Partners own the property equally but don’t deed their portion of the ownership to the other should they die. Their portion would revert to their survivor though the probate court.
Joint mortgages are more common amongst married couples and lenders will regularly arrange for this type of mortgage. Joint mortgages amongst unrelated individuals or partnerships are less common, though some lenders will entertain loans of this type.
The mortgage lender collects financial and credit information on all joint applicants and the loan approval is typically based on collective results. This is done after a review of the credit history, income and current debt load of each applicant. Applying for a joint mortgage is sometimes necessary if one applicant has a few minor credit issues but plenty of income while the other applicant has excellent credit history but insufficient income to cover a mortgage. How much a loan you’ll qualify for will depend on how much combined income the joint owners earn collectively.
If you've decided to enter into a joint mortgage, it's important to understand what will happen if one of the owners decides that they want out of the mortgage, and to seek legal advice prior to entering into a mortgage, and have an agreement drawn up that will address the situation of what will happen with the mortgage in this case. This is particularly important if the joint mortgage holders are unrelated.
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