Joint Mortgage: Is there a legal limit to how many people can be on a mortgage?
There are several things to consider when you begin the process of buying a home. Your mortgage and any legal considerations that might arise during the procedure are two of these things.
Before you sign the dotted line, you may have one question: “how many people are allowed to be on the mortgage?” Well, let’s take a look at joint mortgages and all that it entails.
What is a Joint Mortgage loan?
As the name suggests, a joint mortgage loan is a mortgage agreement shared by two or more people. A joint mortgage and joint ownership are not the same things, even though some people may use both terms interchangeably. While both agreements may involve shared homeownership, the application process may vary.
Joint homeownership means that two or more parties own the home. This could result from purchasing the home together, one or more people were added to the title after the purchase, or several people became homeowners through an inheritance or gift.
On the other hand, a joint mortgage refers specifically to the names listed on the application for the repayment of the mortgage loan.
How do Joint Mortgage loans work?
A joint mortgage loan means joint responsibility. All consignees on the loan are legally responsible for the entire loan. This implies that you will still be responsible for the complete payment even if one or more borrowers cannot make their installments.
It also means that when submitting your loan application, the lender will consider all the legal factors, including the credit score, employment, current assets, income, and the debt-to-income ratio of all the consignees on the loan. Once the loan is approved, each person will sign the promissory note, making each consignee responsible for making payments to the loan.
Once you have signed, the lender can pursue each or all the consignees on loan, whether or not they intended to contribute to payments.
Joint Mortgage requirements
Every loan comes with its own set of requirements for the borrower, and a joint mortgage is no different. Each consignee will be required to provide:
- Your credit score – typically, a score of 650 or higher is what is acceptable
- Fairly low D-T-I (debt-to-income) ratio – Usually lower than 50%
- Combined Down payment – This depends on the lender, but could vary between 3-15%
Pros and Cons of a joint Mortgage loan
Knowing whether or not a joint mortgage loan is right for you depends on your personal situation and how you weigh the pros and cons.
Some of the pros include:
- Possible better mortgage rate – If the other consignees are in good financial standing and have great credit, this could positively affect your mortgage rate. You can find out by using a mortgage calculator.
- Qualify for a larger loan – Combined income is considered when you apply for a joint mortgage. This could result in a larger loan amount than if you were to apply on your own.
- Joint responsibility – Shared responsibility for the loan could help ease the repayment burden.
Some cons may be:
- Unfavorable rates – Just as you could benefit from a great mortgage rate if the consignees are in good financial standing, the opposite could happen if they have bad credit scores and high debt.
- Risk to your credit score – If your consignee defaults on a loan, it will negatively affect your credit score since you are both on the account.
- Ownership confusion – As previously stated, a joint mortgage does not mean joint ownership. It is always advised that you are clear about ownership before you cosign on a loan.
FAQ – Is there a legal limit to how many people can be on a mortgage?
There is no legal limit to the number of people who can cosign on a mortgage. It is, however, important to note that your lender may have certain restrictions as it relates to joint mortgages. Ready to begin your homeownership journey? Contact us today about our mortgage loans!