A joint loan allows you and a co-borrower to apply for a loan and makes both parties equally liable to repay it. In many cases, married couples apply for joint loans when shopping for mortgages, but in some instances, lenders allow more than two co-borrowers.
When looking into mortgage options, it’s a good idea to consider entering a joint loan:
- If you’re a first-time buyer, you may not have accrued an extensive credit history. Having someone with a good track record for making payments, and a higher credit score will increase your chances of qualifying for a loan and getting a lower interest rate.
- Co-borrowers share the risk of defaulting on the loan, but also the benefit of repaying it. When the monthly payments are made on time, all co-borrowers will receive favorable credit reporting.
If you do consider a joint loan for your mortgage, keep in mind that it doesn’t result in joint ownership of the property; that has to do with how the house is deeded. The joint loan only means that if one party doesn’t make the payments, the responsibility of paying the loan falls to the co-borrower(s). This is why it’s extremely important to understand the risks of entering a joint mortgage. It’s a good idea to seek legal counsel and also have written contracts that address what will happen in different instances.