What is a Joint Mortgage?

Introduction

A joint mortgage is a loan issued to two or more people as a group, rather than to one individual. As with regular mortgages, joint mortgages are secured with real property. An example of joint mortgage would be a mortgage granted to a married couple, or a few friends purchasing a property together.

Joint mortgage does not always imply joint ownership of the property. Joint ownership has to be explicitly stated in the property deed. In other words, joint mortgage does not entitle all the mortgage partners to the property; it simply means that all the partners are responsible for repayment of the loan.

Implications

As we saw earlier, a joint mortgage holds each of the parties involved financially responsible for the loan. The lender usually checks the credit history of each partner before sanctioning a joint mortgage.

Applying for a joint mortgage has several advantages. For instance, a couple applying for a joint mortgage can apply for a higher amount as the incomes of both the partners are pooled in. However it is also crucial for all partners to understand how the ownership of the property is distributed.

Ownership Deeds

In situations of joint ownership, there can be two ways of going about documenting the deed. In case of married couple as joint owners, most go for joint survivorship . This means that sole ownership of the property goes to the surviving partner in the event of death of a partner. The surviving owner can prove ownership by presenting the original joint survivorship deed and a copy of the death certificate.

Another way of documenting joint ownership is through joint tenants in common deeds . This is applicable in case of friends or business partners going for joint ownership. Here the death of one partner does not give ownership of their portion to the other partners. Rather, their portion of ownership goes to their survivor (s) such as spouse or children, through probate court.

The Divorce Angle

A potentially confusing situation for married couples as joint mortgage holders is when they divorce. In many cases, one partner quits claim on a jointly held property in favor of the other. Here, the person quitting claim signs a document stating that their part in the joint deed is dissolved. But this does not automatically translate into their part in the joint mortgage being dissolved. The partners are still equally financially responsible for the loan. If one partner defaults on payments, the other person is held responsible no matter whether they still hold a share in the property.

Given the implications, partners thinking about a joint mortgage should have a clear understanding about how they plan to go about it. Issues such as how to deed the ownership and how to manage matters in case the partnership dissolves need to be worked out in advance. Every partner involved should be clear about their rights and responsibilities. It is always better to have a talk with an attorney or the company dealing with the loan.