Joint mortgage: A complete guide for borrowers

Eager to finance a home purchase? A joint mortgage can be a great option – especially for first-time home buyers. That’s because it allows you to split a loan with someone else. This often makes homeownership more affordable, but you should only apply for a joint mortgage after carefully considering several important factors.

Take the time to understand exactly what a joint mortgage is, how it works, and its pros and cons to help you better evaluate whether this arrangement is the best way to purchase a home. Curious how many people can be on a mortgage? What’s the difference between a joint mortgage and joint ownership? What happens if one borrower stops making payments? Read on for answers to these and other key questions.

What is a joint mortgage?

A joint mortgage is a mortgage loan that’s shared by multiple parties, unlike an individual mortgage in which there is only one borrower who is solely responsible for repaying the loan. 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.

Typically, the multiple parties include a home buyer and a friend, partner, or family member. Some people even apply for a parent-child joint mortgage with one or more of their adult children.

“A joint mortgage allows two or more people to buy a home together when neither could apart,” says real estate attorney and REALTOR® Bruce Ailion. "In a joint mortgage, your lender will review the earnings, credit histories, and debts of every borrower during the underwriting process, which can increase the total loan amount you qualify for. All borrowers are named on the mortgage note and share full legal responsibility for the entire payment – no matter what personal arrangements they may have made about dividing the costs."

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.

“A joint mortgage only tells you who owes the lender money, while joint ownership tells you who owns the property legally,” says Dennis Shirshikov, a professor of economics and finance at City University of New York/Queens College. “You can have a joint mortgage without also owning the property. For example, a parent can co-sign the loan but not be on the deed. On the other hand, two friends can co-own property through an LLC, but only one of them, for example, may be on the mortgage.”

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 husband and wife, 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. As co-borrowers, 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.

How many people can be on a joint mortgage?

There’s no legal limit to how many people can be on a mortgage, but your lender may have restrictions in place. Often, four to five borrowers is a common lender guideline, but the rules can differ depending on whether it’s a conventional mortgage loan or a government-backed loan. Here’s the breakdown by loan type:

Remember that everyone on the loan also must qualify for the financing to be approved, and some lenders may see a big group of names as a risk.

“Including more than one borrower on a mortgage can make the process more complex, since the lender must thoroughly investigate each person’s earnings, liabilities, and credit history,” Ailion says. “While the group’s overall financial profile and total debt-to-income ratio are weighed, lenders often expect every applicant to meet certain baseline qualifications individually. A problem in just one borrower’s application can slow things down – or even cause the whole mortgage to be denied.”

Whose credit score do lenders use?

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.

“When multiple people apply for a mortgage, the lender bases its decision on the lowest middle credit score among them,” says Ailion. “Each borrower has three scores – one from each major credit bureau – and the middle value is used for underwriting. For example, if one borrower’s scores are 760, 720, and 700, their middle score is 720. If the other borrower’s scores are 680, 670, and 660, their middle score is 670. In this case, the lender would rely on 670 for determining loan terms and eligibility. This cautious method helps safeguard the lender against the greater risk associated with the applicant who has the weaker credit profile.”

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

What happens 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.

There are several risks involved here, including the risk of potential foreclosure if you default on your loan, as well as credit score damage. That’s why you should consider your co-borrower candidates carefully. Ask yourself: How certain am I that this other person will fulfill their obligations to repay the mortgage debt with me?

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 conventional conforming mortgage loan qualification, 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-to-value (LTV) ratio of up to 97%
• Steady income and stable job security
• 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

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

Increased buying power

With a joint mortgage, you get the chance to pool your income with another person’s or that of several people. This may allow you 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. This is especially helpful in the current housing market, where prices remain expensive.

Easier loan qualification

Truth is, applying for a mortgage loan with others who may have more income or better credit can help you get a loan that you might not otherwise be able to qualify for on your own. Pooling with co-borrowers can also lead to more favorable loan terms.

“Putting together income and assets can help borrowers get bigger loans or lower interest rates. This is especially important in today’s housing market, where prices are high,” Shirshikov says. “When two or more people apply together, they usually have lower DTI ratios and are more likely to get approved, which can lead to better fee structures and prices.”

Potentially more affordable homeownership

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 and easier to budget.

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 the mortgage payments aren’t being made. For joint ownership to work effectively, the other borrower must pay and share costs as agreed.

Cons of a joint mortgage loan

Combining resources with friends, family members, or partners can open doors for you to get a mortgage. Problem is, it can also create complications. Here are a few of the downsides of getting a joint mortgage loan.

Full responsibility for 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 and finances. 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) and lender in advance.

Right for co-mortgagees to sell

Here’s a caveat to consider carefully: 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.

This can negatively impact other co-borrowers who don’t want to sell.

Potential legal complications

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

“When co-borrowers clash over who owns what or who should pay what, the conflict can spill into the legal system. Having a written agreement is better than a stranger deciding," says Ailion. “In past cases, courts have dealt with matters like partition actions to force a property sale, lawsuits seeking repayment from a co-owner, and claims for a constructive trust. Such disputes often drag on and rack up significant legal expenses.”

It’s a good idea to speak to an attorney to better understand your property rights.

Is a joint mortgage right for you?

Married couples and domestic partners who share the same long-term goals are often the best candidates for co-borrowing on a mortgage loan. That’s also true of parents who co-sign to help their kids get better rates.

“When close family members pool their money, like when siblings purchase a vacation home together, they can also benefit – especially if they do it through an LLC with an operating agreement,” says Shirshikov.

Worthy prospects for joint mortgages also include those with compatible credit profiles who can communicate well together and have a plan for what to do if things change in the future.

“Roommates and business partners can also be good candidates, but they must have strong trust in a written agreement detailing exit procedures, contribution expectations, and conflict resolution,” Ailion says. “Face it: People change, often for the worse. One of the toughest questions to answer is, ‘Why didn’t you recognize that behavior before you locked into the mortgage together?’”

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’ll need to take to complete the loan application process:

1. Research lenders and loan options. 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 in the mortgage loan process. Take the time to get preapproved, too.

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 and provide 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 the 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 and pay closing costs.

How to get out of a joint mortgage

The good news is that it’s possible to be removed from a joint mortgage if, for any reason, you want out. But escaping the legal responsibilities of a joint mortgage typically requires a refinance or home sale to remove you or the other borrower(s) from the loan. With the former, the remaining party or parties must refinance the loan in their own name, assuming they qualify independently.

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 to remove 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.

Be 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, you can opt to 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. It can be difficult to get everyone to agree to a home sale, as they must give up ownership and residency in the property as well.

“Selling can lead to potential capital gains taxes or fees for paying off the loan ahead of schedule. In most cases, every borrower must agree to the sale – unless a court, as in certain divorce cases, orders otherwise,” says Ailion. "It’s best to resolve a conflict before you have one. Decide in writing well in advance, preferably with an attorney’s assistance, how outcomes are to be resolved. In conflict situations, emotions are raw and hostility is high. Once you reach that point, it’s hard to do what you should and would have agreed to in the beginning.”

FAQ

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 you add someone to a joint mortgage later?

It's typically not possible to add a new borrower to an existing mortgage without refinancing. The lender will not simply insert a new party onto the promissory note due to the associated underwriting risk. However, someone may be added to the property deed via a quitclaim or warranty deed, even if that person is not added to the mortgage.

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 purchase 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 research to make sure you’re getting the best deal, whether applying individually or joint mortgage. Also, unmarried couples should consider executing a cohabitation agreement that defines ownership percentages, exit procedures, and dispute resolution mechanisms, especially if one party contributes more to the down payment or ongoing costs.

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. Note that the lender may call the loan do if specific terms are triggered, although most lenders will not enforce due-on-sale clauses against surviving spouses or co-borrowers who continue making payments. If the deceased held title, probate or estate proceedings may be required to transfer legal ownership.

How does a joint mortgage affect 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.

The bottom line: A joint mortgage opens doors, but know your responsibilities

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^®.