Joint Mortgage: A Complete Guide For Borrowers

When financing a home, a joint mortgage can be a great option – especially for first-time home buyers – because it allows you to split a loan with someone else. This often makes homeownership more affordable, but you still shouldn’t apply for a joint mortgage without carefully considering several important factors.

Understanding exactly what a joint mortgage is, how it works, and its pros and cons can help you better evaluate whether a joint mortgage is the best way for you to go about purchasing a home.

What Is A Joint Mortgage Loan?

A joint mortgage is a mortgage loan that’s shared by multiple parties – typically, a home buyer and a friend, partner or family member of theirs. Some people apply for a parent-child joint mortgage with one or more of their adult children. A joint mortgage allows two or more parties to pool their financial resources and potentially qualify for a bigger or otherwise better loan than they could’ve been approved for on their own.

Joint Mortgage Vs. Joint Ownership

Unlike joint ownership, which involves two parties equally taking on the legal ownership of a property, a joint mortgage has nothing to do with whose name is on the deed. With a joint mortgage, at least two parties are responsible for the loan – even though one of them may not have their name on the deed and possess ownership of the property.

How Do Joint Mortgage Loans Work?

When you buy a house with a joint mortgage, you share responsibility for the loan with at least one other person. While joint mortgage applicants are often married, you don’t have to be married to the other party on your loan – you just both have to qualify and, in most cases, be at least age 18.

The factors a lender will consider when deciding whether you qualify for a home loan are pretty much the same ones they’d examine if you applied for a mortgage by yourself; your lender will look at borrower credit scores, income, debt and employment history. Everyone who will be on the loan must submit a mortgage application.

If you’re approved, both you and the other party or parties involved will sign a promissory note. You’ll each be equally responsible for making payments on the loan, though one of you can make the payments on behalf of the pair or group.

Who’s Responsible If One Borrower Stops Making Payments?

Be aware that if someone stops making their share of the payments, the lender can penalize and come after any of the borrowers for the money, since they’re all equally responsible. That said, make sure whoever you decide to share a joint mortgage with is fully committed to repaying their share of the loan.

Whose Credit Score Is Used On A Joint Mortgage?

When you get a joint mortgage, your lender will look at the credit history and credit scores of all applicants who will be on the loan. Since everyone’s credit will impact the loan you qualify for, a poor credit score can be detrimental to you or the person you’re applying with.

If your credit score or the credit score of a co-borrower is making it difficult to get a joint mortgage, other options do exist. You may still be able to qualify for joint ownership, which won’t put the poor-credit-applicant’s name on the loan but will grant them legal ownership of the property alongside the other borrower(s) involved.

Joint Mortgage Requirements

To qualify for a joint mortgage, you’ll need to meet the same requirements as any other type of borrower. That means you’ll want at least a decent credit score and minimal debt.

For a conventional conforming loan, you’ll generally need:

• A minimum credit score of 620
• A debt-to-income ratio (DTI) no higher than 50%
• A down payment of at least 3% of the purchase price (although a lender could require as much as 15% down)
• A loan amount within the conforming loan limits for your area, as set by the Federal Housing Finance Agency (FHFA)

Pros Of A Joint Mortgage Loan

So, why would you want to get a joint mortgage loan over a loan with just your name on it? Here are a few of the benefits of a joint mortgage.

More Housing Options

With a joint mortgage, you get the chance to pool your income with another person’s or that of several people. This may give you the opportunity to pursue homes that would otherwise be out of your price range, since having two incomes on a mortgage application means you’ll likely be able to qualify for a larger loan.

The Potential For Homeownership To Be More Affordable

Having two people responsible for the mortgage payments and other costs associated with owning a home can reduce the financial burden and make homeownership more affordable.

However, simply being on a joint mortgage with someone doesn’t completely ensure that they’ll faithfully contribute to maintenance costs – or even the mortgage payment they’ve agreed to make in part. It simply allows the lender to hold them accountable if t

he mortgage payments aren’t being made.

Tax Benefits

As with most mortgage loans, you can typically deduct mortgage interest – and some other fees – if you itemize deductions when filing your taxes, rather than taking the standard deduction. Typically, the person who actually paid the interest (and property taxes) is the one entitled to deduct the expenses on their report. If both you and your spouse or another co-borrower paid a share of the interest or taxes, you’ll want to attach an explanation of that and how much you each paid to your return.

Cons Of A Joint Mortgage Loan

While pooling your resources with friends, family members or a partner can open doors for you to get a mortgage, it can also create complications. Here are a few of the downsides of getting a joint mortgage loan.

The Possibility Of Full Responsibility For Mortgage Payments

If the other borrower on your loan can’t afford their half of the payment or just chooses not to pay as planned, you may be held responsible for the entire mortgage payment – and their inability or refusal to pay will impact your credit. If a co-borrower passes away, the responsibility for the entire loan falls to you and anyone else who’s responsible for paying the joint mortgage.

With this in mind, you shouldn’t necessarily choose to have a co-borrower just because you might be able to afford a more expensive home with their help. Before agreeing to any loan, you should always research how much house you can afford and discuss all possible outcomes with your co-applicant(s) in advance.

Co-Mortgagees Having The Right To Sell

The legal owner of a property can force a sale – even if the other party responsible for the loan doesn’t agree – if their name is the one on the deed. Although a joint mortgage means two or more parties are responsible for the loan, one person from the pair or group can legally hold ownership of the property by themselves – and sell the property, if the court agrees to their order of sale.

No Guarantee Of Joint Ownership

As mentioned, all parties on a joint mortgage don’t necessarily own equal shares of the property. Unless they are joint tenants/have full joint ownership, it’s likely that only one of the borrowers in a joint mortgage has their name on the actual property deed.

How To Get Out Of A Joint Mortgage

If you get into a joint mortgage that, for any reason, you’re no longer able to be a part of, it’s possible to get out of it. Escaping the legal responsibilities of a joint mortgage typically requires a refinance to remove you or the other borrower(s) from the loan.

Here are a few of your options, if you happen to find yourself in this position.

Enter Into An Agreement

If you want out of a joint mortgage, first have an honest talk with your co-borrower about your desire. Since this person will likely be a family member or a friend, this conversation can be difficult, but if the other party understands your intentions and reasoning for wanting out, they may be more willing to consider refinancing for the purpose of removing your name.

If you both aren’t willing to refinance, you likely won’t be able to get out of the loan. So, it’s a good idea to approach the issue only if you think a refinance might be an agreeable course of action.

Make sure to consider the costs to refinance before bringing up this possibility to your co-borrower. This way, you can both know what it would cost to remove you from the loan and have you no longer be responsible for the mortgage payments.

Buy Out Your Partner

If your partner or co-borrower wants out of a joint mortgage, it’s possible to buy them out if all parties agree to it. This means you essentially give your partner(s) their share of the equity through a cash-out refinance.

You’ll need to have some equity built in the home to pull this off successfully, but if it’s an option for you, it can be a way to remove other parties from the loan and refinance to sole ownership.

How It Works

You’ll likely be required to have your home appraised as well as determine the equity in the home that belongs to each partner. If you can all agree on a buyout price, you can proceed to refinance and become the sole owner of the mortgage. Keep in mind that you’ll also need to qualify individually for your lender’s requirements on the new loan. This can sometimes be difficult if you originally took out the loan with multiple partners.

Sell The Home

If all parties agree, it’s also an option to just sell the home and move on. Rather than deal with refinancing or having to buy out a co-borrower, selling the home and going separate ways can relieve all parties of the responsibilities of the current joint mortgage loan.

If one or more of your co-borrowers is attached to the home, however, this option may not be feasible for you.

How To Get A Joint Mortgage

If you’ve carefully considered the benefits and drawbacks of a joint mortgage and are ready to move forward with applying, here are the steps you should plan on taking as part of the loan application process:

1. Compare loan options and choose a lender. When taking out a joint mortgage, start by comparing lenders to see which one will offer you the best loan conditions. You’ll also want to carefully consider the types of mortgages available to you and determine which option is the best fit.

2. Apply for a joint mortgage. Once you’ve chosen the lender and type of joint mortgage you want, you can fill out and submit your initial loan application. You can often complete this process online.

3. Gather documentation. As part of the underwriting process, your lender will ask for documentation from every borrower. You’ll need to gather recent pay stubs, W-2s, 1099s, bank statements and possibly other documentation to verify your finances.

4. Close on your loan. If all goes according to plan during the underwriting process, the last step is to close on your loan. All borrowers will need to attend the closing to sign the required paperwork and disclosures.

FAQs About A Joint Home Loan

If you’re thinking of taking out a joint mortgage, the answers to some frequently asked questions about this topic may help guide your decision.

Can three people be on a mortgage?

There’s no legal limit to how many people can be on a mortgage, but your lender may have restrictions in place. Remember that everyone on the loan also must qualify for it to be approved, and some lenders may see a big group of names as a risk.

Even if multiple people aren’t on a loan, keep in mind that multiple parties can still own a property through joint tenancy or tenancy in common.

Can a joint mortgage be transferred to one person?

A mortgage can technically be transferred to one person via refinance. For this to happen, you’ll need to refinance to a sole ownership loan or – if your partner won’t agree to that – use a cash-out refinance that will give them their equity in exchange for the title of the house.

Can an unmarried couple buy a house together?

Yes, an unmarried couple can buy a house together. You don’t have to be married to someone to buy a house with them or get a joint mortgage. However, when buying a home as an unmarried couple, you’ll want to do research to make sure you’re getting the best deal whether applying individually or for a joint mortgage.

What happens to a joint mortgage when someone dies?

If a co-borrower dies, responsibility for the mortgage payment falls to the surviving borrower(s). If the deceased party had their name on the home’s property deed, partial ownership could pass to a family member or heir through a will. Otherwise, probate court will determine what happens to the deceased party’s share of the title.

The Bottom Line

Buying a home with a partner, friend or family member can be exciting. Getting a joint mortgage can make homeownership more affordable and more feasible for many people, making it a good option for first-time home buyers. Since two or more people are equally responsible for making payments, however, some complications can arise with a joint mortgage – particularly if you ever want to get out of the arrangement.

If you’re looking to buy a home, with or without another party, you can start your mortgage application online today with Rocket Mortgage^®.