A joint mortgage means nothing more than that two people are sharing the responsibility for paying the mortgage loan. Both names are included on the loan agreement, and both are equally responsible for ensuring that the mortgage loan is repaid as contracted. It does not infer that each has a share in the ownership of the property.
For example, you could have a parent help you to purchase your home by agreeing to have their name stated on a joint mortgage. This gives added security to the lender, and will enable the parent’s income to be considered when the total sum you can borrow is agreed. Without the joint mortgage you would have had to purchase a cheaper property.
Joint Mortgage and Joint Ownership Are Not the Same
So Joint Mortgage and Ownership are not the same. The discussion is between a joint mortgage where the risk is shared, and joint ownership, where each party involved in the risk also owns their share of the property. You would think the latter arrangement would be best, but not always.
Sometimes it is not best for ownership of the real estate to be legally shared. One example of this is where a parent has helped a couple to purchase their first home. Although a joint mortgage would be necessary for this to happen, it would be crass for the parent to then insist on owning a share of the marital home.
Even if ownership has been agreed to be shared, there are options as to the way in which it is shared. There are two basic options you should consider when coming to a joint ownership agreement. You can make the passing on of ownership to your partner automatic on your death, or make it clear in your will to whom ownership should go.
Joint Ownership Agreements
Joint Tenancy Agreement: There are some legal aspects of joint ownership that should be considered. This can be arranged in two ways. One is Joint Tenancy, where the property is jointly owned and the survivor assumes sole ownership in the event of the other partner’s death. This is the best arrangement for married couples, and should be set up when the mortgage is arranged. It guarantees the survivor to take sole ownership of the property.
Tenants in Common: The other is known as Tenants in Common, where each partner owns an equal share of their home. They can leave that share to whoever they wish in their will. In event of a death, sole ownership would have to be established in probate court. It is feasible in this case for one partner or even both to leave their share in the property to a third party in their will.
Leaving the Mortgage Agreement
It is normally not possible for either partner to leave the mortgage agreement. Both are legally responsible for repaying the mortgage loan. Even if they agree between them, the lender will likely not agree unless they are certain the remaining person has the wherewithal to make the combined payment. Only if the loan is assumable can this be carried out by right, and even then only if the remaining debtor is able to prove continued ability to pay.
Joint Mortgage Vs Joint Ownership: Summary
This is not a choice, and hence not a valid comparison. Joint mortgage and joint ownership are not options as such. You can have one without the other. Two people can jointly pay a mortgage on a home that only one of them owns. Likewise two people can be legal owners of a home, the mortgage for which only one of them pays.
If this seems confusing, a mortgage professional can help make things clear. It is essential that you understand these terms before entering into any one of them. You don’t want to find yourself paying equally for a mortgage on a home for which you have no ownership rights – unless it is for your son or daughter! For more information, please contact Anthony DiLeo at (732) 264-2700 x 18, email at [email protected]