How a Joint Mortgage Can Either Be a Money-Saver Or a Heartache

Buying a Loft is the biggest single purchase the average person is going to make in their lifetime. For many people, a Loft would simply be too heavy of a financial burden to take on alone as a single transaction. Considering the current state of the economy, even when real estate property prices are relatively low these days, lenders have stricter standards of screening mortgage applicants. This means that only borrowers who have the lowest level of risk get their applications approved. One way of minimizing your risk is by applying for a joint mortgage.

What Is a Joint Mortgage?

A joint mortgage is when two or more partners apply for a mortgage together. This helps with minimizing credit risk. In a joint mortgage, the incomes and assets of both applicants are treated as a combined number. This is especially important for larger mortgages. 

The way individual debts are considered varies between lenders. Some lenders look at the debts of the partners as a combined number, while other lenders only consider the lower debt while others look at the median between both debts. Other lenders consider only the debts of the higher earner. 

How Is It a Money-Saver?

Joint mortgages have a better appeal than individual applications. This is because of the fact that your partner’s finances can boost your own, and vice versa. This is useful not just for getting your mortgage application approved, but it will also help boost your credit score (assuming your partner has a better credit score than yours), which allows you to secure better interest rates.

Partners also enjoy tax benefits in a joint mortgage in the form of tax rebates as well as a lower property transfer tax. Even the tax obligations are split between the partners.

How Is It a Heartache?

Since combining your assets can help one person, it can be detrimental to the other. This is especially prevalent when you’re applying with a partner who has a bad credit history. If your credit history is not enough to offset your partner’s bad credit history, your application may be denied, or you might end up with worse interest rates versus if you applied on your own.

The worst problems of a joint mortgage come after you secure the mortgage. In a joint mortgage, all borrowers must make payments on time. If a partner fails to pay, both partners are penalized. If someone’s payment comes short, the partner’s need to compensate for it. You also have to consider the possibility of what’s going to happen if the partnership fails, either because of a divorce or by death. 

In death, the property, as well as the mortgage automatically go to the surviving partner. In a divorce, even as your marriage is rescinded, your mortgage obligation is not. This means that both partners are still obligated to pay their mortgage. The heartache in this comes in determining which of the spouses keeps the Loft. It’s for this reason that it’s always important to protect your assets.

With these things in mind, whether or not you get a joint mortgage is a matter of weighing the pros and cons while also considering your situation. As a general rule, if you plan on getting a joint mortgage, it’s important to get one only with a stable and responsible partner. You do not want this kind of heartache.

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