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Take out a mortgage is probably the biggest financial commitment most people will ever make. And that’s why rather than doing it alone, people often choose to share the responsibility. It is more and more common for people to join forces with their partners, family members or friends. To do this, they take out a joint mortgage.

In this article, we’ll take a look at how joint mortgages work, as well as the pros and cons of getting one.

What is a joint mortgage?

A joint mortgage is simply a mortgage that you take out with another person. You can purchase it with your spouse or civil partner, friend, family member or business partner.

In most cases, you are taking out a joint mortgage with just one other person. Some lenders allow up to four people to take out a joint mortgage.

How does a joint mortgage work?

When you take out a joint mortgage, all parties will generally be named on the deed of ownership and will be jointly responsible for the mortgage debt.

This means that if one of you fails to meet your share of the repayments, the other party or parties will have to make up the shortfall.

So it’s wise to make sure that the person you sign up with is someone you trust and is responsible for the money.

What types of joint mortgages are there?

1. Roommate

Here, each of you will have equal rights to the entire property. If the property is sold, the profits will be split equally between you two.

If one of the partners dies, the other will automatically inherit the property.

This type of mortgage is often taken out by couples who would like a property to be automatically transferred to their partner in the event of death.

2. Tenants in common

This option is often appropriate when buying a home with a friend, family member or business partner.

Here, each party in the partnership has a legally distinct and specific share in the property. The actions do not need to be divided equally and can correspond to the percentage desired by the partners. Partners can sell their shares in the property separately.

Common tenants can also leave their share of the property to whomever they want in their will.

Do I have to take out a joint mortgage?

There are advantages and disadvantages to taking out a joint mortgage.

Advantages

  1. You can get a better rate. Join forces with someone with good financial credentials like a good credit rating can increase your chances of getting a good mortgage rate.
  2. You can borrow more. By combining the income with a partner, you can apply for a larger loan.
  3. Shared responsibility. Rather than taking on a huge financial responsibility on your own, a joint mortgage allows you to share the burden with someone else.

Disadvantages

  1. Lower rate possible: If the other person has a bad credit score or generally poor financial credentials, this could lead to getting a less than favorable rate or even being denied a mortgage.
  2. Possible damage to credit score and legal action. If the other person doesn’t live up to their end of the deal, resulting in late or missed repayments, your credit score could be affected and you could even face legal action.
  3. Ownership issues: If a partner dies or wants to leave, this can open a box of worms regarding ownership and what to do with ownership.

Can I get out of a joint mortgage?

Yes. Circumstances may change and one party may want to leave the joint mortgage.

For a roommate, things will probably be simple because the outgoing partner can be bought out, or the the property can be sold each person then takes their share of the profits.

If you take out your mortgage as a common tenant, things could get a little more difficult. This is especially the case if you cannot decide how the value of the house should be divided. You may have to take the case to court, which can be very expensive.

If you choose to take out a mortgage as common tenants, consider find a notary first and ask them to write a “trust deed” that specifies the percentage of the property that each of you owns. This could avoid problems and misunderstandings on the road.

To take with

If you want to share the financial responsibilities of owning a home, a joint mortgage may be a good idea.

However, keep in mind that shared responsibility comes with additional risks. Weighing these risks against the potential benefits can help you determine whether taking out a joint mortgage is worth it.

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