When it comes to mortgages, you can easily get lost in a frenzy of terms. But, we’re here to simplify that for you. In this post, we’ll walk you through what a joint mortgage is and some considerations that go along with it.
What Is A Joint Mortgage?
A joint mortgage is a mortgage that is taken out by two or more people. When you think of a joint mortgage, most commonly a picture of a couple will come to mind. But, there aren’t any restrictions on the relationship of those who opt to take out a mortgage jointly. It could be friends, colleagues, family members, etc.
What To Keep In Mind As Co-Borrowers
When taking out a joint mortgage it is important to understand the fine details. Your credit score and debt owing will both be factored in during the application process. Depending on the lender, they may evaluate the person with the lower credit score, the individual with the higher score or even a median of the two.
If one partner has a higher credit score it may be enough to boost someone with a lower score and a joint mortgage takes into account the incomes of both people on the application which may help you get approved for a larger amount
However, depending on your financial situation, it may make sense for one individual to apply for the mortgage independently rather than going in a joint mortgage. It’s important to talk to your financial institution or a mortgage broker to get advice on what will get you your desired amount at the most optimal rate.
Other Honourable Mentions
A home may very well be the largest purchase you ever make so it’s incredibly important that you choose wisely. A joint mortgage means that you’re both responsible for the repayment of the loan. This means that if one person cannot come up with their share of the mortgage payment, you’re both on the hook. It can also become messy if the relationship is severed. In that case, one of the co-borrowers may end up having to buy the other person out by paying them their portion of the equity in the home.
Before you take out a mortgage, whether it be jointly or individually, it’s important to know your options and your risks and weigh them all accordingly in order to make the best decision for you.