Joint Mortgages – The Positives And The Pitfalls

What Is A Joint Mortgage?

First Published: July 2, 2009

Taking out a mortgage is an almost indispensable part of buying a house for many individuals. Those of us who have been party to a windfall via inheritance, as a prize or a bonus may be able to pay directly by cash to own the house we want. The rest of us will need, as most people do, to find a mortgage that suits our needs and our means.

Mortgage borrowing is quite unlike any other kind of borrowing. The amounts are higher than any typical loan or credit line, and consequently the term of the loan will usually be longer. As the term is longer, this means the scope for default is consequently larger. With the larger scope for defaulting on a mortgage comes the need for banks to cover themselves before lending. The outcome of this is that if you cannot meet mortgage payments, your home is at risk.

With the higher level of commitment and its knock-on effect on just about everything you could possibly think of, the amount of thinking that needs to go into taking out a mortgage naturally will increase. Although all you really want is to buy a house, you need to stop and think about what the best way of going about things will be. Can you afford to take a mortgage that will secure you the house you really want? How sure are you that the payments you can make today will be affordable five years from now, or ten years, or twenty? If borrowing to buy a house will really over-stretch you, you may need to take a different angle.

The angle that people will traditionally take – if they find that their borrowing ability is not conducive to buying a house alone – is to look at taking a joint mortgage with someone else. If the house purchase is part of a couple, married or otherwise, trying to set up home together, then there may be an obvious situation. In some couples, though, only one is gainfully employed and eligible to get a good mortgage deal. In others, it may be that one of the partners has poor credit history, which will lead any lending institution to either decline the application or at the very least put restrictive terms on it.

Some people will choose to co-sign for a mortgage with a parent or other older relative. In these cases, assuming that the elder party is “young enough”, there is a lot of scope for a good deal. However, it is important to realize that although a joint mortgage brings in two different incomes, two different histories and two different brains, it also encompasses two different personalities – and if at any point those two personalities start to clash, there will be problems in the operation of the account that could make an individual look like the most secure borrower of all. If borrowing as joint mortgage account holders it is important to take account of this, and make sure the loan is flexible.