Single vs Joint Mortgage Loan
Taking out a mortgage is one of the most serious financial undertakings a person can make. The possibility of easing the burden by getting a joint mortgage could be tempting, but what does it entail? In this article, we detail the basics of single and joint mortgages to help you decide which one is right for you.
How do mortgages work?
Mortgages or home loans are used to finance a real estate property for residential or investment purposes. When you take out a mortgage, you use money borrowed from the lender to buy your home. You pay back the lender the amount owed plus interest over an agreed period known as a loan term.
Mortgages also come with different interest payment schemes; a fixed interest rate loan and a variable interest rate loan. A fixed interest rate mortgage means the interest rate and repayment amount will not change throughout the fixed period you choose (typically between 1 to 5 years). Meanwhile, a variable interest rate mortgage means the rate can be varied during the loan term depending on lender and/or market movements. When the rate fluctuates, the repayment on the loan will likely fluctuate too.
Typically, lenders are listed on the title of the property until the borrower pays off the entirety of the loan. If the borrower fails to make the repayments, the lender can repossess the property. After the mortgage is paid off, the borrower will own the property outright.
What is a joint mortgage?
Most borrowers take out a single mortgage where only one person is responsible for making repayments on the home loan. However, there is also an option to take out a mortgage with one or more people, which is called a joint mortgage.
A joint mortgage is when two or more borrowers are responsible for paying off the loan. All the borrowers’ names will be on the mortgage. You can apply for a joint mortgage with anyone be it a partner, friend, or family. The lender will assess the combined financial standing and borrowing capacity of all the borrowers. This includes checks on credit, assets, income, debts, and the like.
How to apply for a joint mortgage
When applying for a joint mortgage, all the borrowers must provide the necessary documents and requirements. You can apply for a home loan online or talk to a lending specialist for more information about the joint mortgage application process.
Keep in mind, that you’ll have to decide how much each person will contribute to the mortgage payments. Borrowers have the option to split it evenly between all parties involved or have every borrower pay a different percentage.
Single mortgage application vs Joint mortgage application
Each option offers its own advantages and disadvantages. The right mortgage for you depends on your specific situation.
A single mortgage may be a good idea if...
You have a strong financial profile, and you can easily make the mortgage repayments on your own. If you have a good credit score and are in a strong financial position, it may also increase your chances of being approved for a home loan compared to applying with someone who isn’t in as good of a financial standing.
Advantages of a single mortgage
- You have full control of your mortgage. You’re not relying on co-borrowers to make payments and aren’t liable for anyone in case someone can’t pay their share.
- It offers more flexibility. You have the freedom to do whatever you want to the property. You can turn it into a rental or sell it down the line without consulting co-owners.
- The process is more straightforward. You don’t have to think about dividing assets or figuring out percentages when repaying the loan.
A joint mortgage may be a good idea if...
You would have trouble affording a property on your own or will be living with another person. Pooling resources may be beneficial, especially for people who live together such as partners or family members. All borrowers would also have ownership of the house when the mortgage is paid off.
Advantages of a joint mortgage
- You could have stronger borrowing power. Borrowers can qualify for larger loans or better terms when they combine their incomes. If a co-borrower has a better credit rating, it could improve overall creditworthiness and increase chances of approval.
- The responsibility is not solely on you. A joint mortgage means co-borrowers are easing the financial burden of home loan payments.
What should you consider when applying for a mortgage?
When taking out a single mortgage, the most important thing to consider is whether you can afford to make the payments. Since you’ll be the only one responsible for paying off the loan, you need to ensure that you’re in a good place financially.
Applying for a joint mortgage, on the other hand, requires a bit more consideration. In addition to your finances, you need to consider your co-borrowers' finances, as well. When you apply for a joint mortgage, the lender will consider your combined income and debt. However, if one of the co-borrowers has significantly better or worse finances, it may be a point against your application.
Homeownership is also affected by the type of mortgage you choose. A single mortgage is pretty straightforward. Since only one person is paying off the loan, that person will own the home once the loan term ends. For joint mortgages, all parties paying for the loan have legal rights to the home which could cause issues if one decides to sell it.
Should you get a single mortgage or a joint mortgage?
If you’re buying a house on your own, it may be better to get a single mortgage to avoid complications with ownership. However, if you and your partner, for example, want to purchase a home, combining finances and applying for a joint mortgage could be beneficial. Ultimately, it depends on your situation and what your needs are.
If you want to learn more, you can talk to our friendly lending specialists by calling 13 10 90, they can tell you all about your mortgage options be it single or joint.
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
