Blog Archives

Joint Mortgage and Joint Ownership: Which is the Better?


A joint mortgage meaImagens nothing more than that two people are sharing the responsibility for paying the mortgage loan. Both names are included on the loan agreement, and both are equally responsible for ensuring that the mortgage loan is repaid as contracted.  It does not infer that each has a share in the ownership of the property.

For example, you could have a parent help you to purchase your home by agreeing to have their name stated on a joint mortgage. This gives added security to the lender, and will enable the parent’s income to be considered when the total sum you can borrow is agreed. Without the joint mortgage you would have had to purchase a cheaper property.

Joint Mortgage and Joint Ownership Are Not the Same

So Joint Mortgage and Ownership are not the same. The discussion is between a joint mortgage where the risk is shared, and joint ownership, where each party involved in the risk also owns their share of the property. You would think the latter arrangement would be best, but not always.

Sometimes it is not best for ownership of the real estate to be legally shared. One example of this is where a parent has helped a couple to purchase their first home.  Although a joint mortgage would be necessary for this to happen, it would be crass for the parent to then insist on owning a share of the marital home.

Even if ownership has been agreed to be shared, there are options as to the way in which it is shared. There are two basic options you should consider when coming to a joint ownership agreement. You can make the passing on of ownership to your partner automatic on your death, or make it clear in your will to whom ownership should go.

Joint Ownership Agreements

Joint Tenancy Agreement:  There are some legal aspects of joint ownership that should be considered. This can be arranged in two ways. One is Joint Tenancy, where the property is jointly owned and the survivor assumes sole ownership in the event of the other partner’s death. This is the best arrangement for married couples, and should be set up when the mortgage is arranged. It guarantees the survivor to take sole ownership of the property.

Tenants in Common: The other is known as Tenants in Common, where each partner owns an equal share of their home. They can leave that share to whoever they wish in their will. In event of a death, sole ownership would have to be established in probate court. It is feasible in this case for one partner or even both to leave their share in the property to a third party in their will.

Leaving the Mortgage Agreement

It is normally not possible for either partner to leave the mortgage agreement. Both are legally responsible for repaying the mortgage loan. Even if they agree between them, the lender will likely not agree unless they are certain the remaining person has the wherewithal to make the combined payment. Only if the loan is assumable can this be carried out by right, and even then only if the remaining debtor is able to prove continued ability to pay.

Joint Mortgage Vs Joint Ownership: Summary

This is not a choice, and hence not a valid comparison. Joint mortgage and joint ownership are not options as such. You can have one without the other. Two people can jointly pay a mortgage on a home that only one of them owns.  Likewise two people can be legal owners of a home, the mortgage for which only one of them pays.

If this seems confusing, a mortgage professional can help make things clear.  It is essential that you understand these terms before entering into any one of them. You don’t want to find yourself paying equally for a mortgage on a home for which you have no ownership rights – unless it is for your son or daughter!

 

Advertisements

4 Tips That Can Save You Thousands


We provide monthly newsletters to our clients who are either shopping for a home or wanting to buy relatively soon. This article, written by Randy Glasbergen (2006) talks about 4 tips that can save you thousand when wanting to buy a home.

1. Don’t Get Pre-Qualified.

Get pre-approved.

Do you want to get the best house you can for the least amount of money?  Then make sure you’re in the strongest negotiating position possible.  Price is only one bargaining chip in the negotiations, and not necessarily the most important one.

Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.  This process takes anywhere from a few days to a few weeks depending on your situation.  It’s VERY POWERFUL and a weapon we recommend all of our clients have in their negotiating arsenal.

2.  Sell First, Then Buy.

If you have a house to sell, sell it before selecting a house to buy!

Let’s pretend that we go out looking for the perfect house for you.  We find it and

you love it!  Now you have to make an offer to the seller.  You want the seller to reduce the price and wait until you sell your house.

The seller figures that’s a risky deal, since he might pass up a buyer who DOESN’T have to sell a house while he’s waiting for you.

So he says OK, he’ll do the contingency but it has to be a full-price offer.  So you see, you paid more for the house than you could have because of the contingency.  Now you have to sell your existing house, and in a hurry, otherwise you lose the dream house.  So, to sell quickly you might take an offer that’s lower than if you had more time.

3. Play the Game of Nines.

Before house hunting, make a list of nine things you want in the new place.  Then make a list of the nine things you don’t want.  We call this Nine of This and None of That.

You can use this list as a scorecard to rate each property you see.  The one with the biggest score wins!  This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.

When house hunting, keep in mind the difference between skin and bones.  The bones are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan.  The skin represents easily changed surface finishes like carpet, wallpaper, color, and window coverings.  Buy the house with good bones, because the skin can always be changed to match your tastes.  I always recommend that you imagine each house as if it were vacant.  Consider each house on its underlying merits, not the seller’s decorating skills.

4.  Don’t Be Pushed Into Any House.

Your agent should show you everything available that meets your requirements.  Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one.  Review the Multiple Listing printout with your agent to make sure that you are getting a COMPLETE list.

In the late 1980s, homes were selling quickly, usually a few days after listing.  In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house.  That was good advice at the time.  Today there isn’t always this urgency, unless a home is drastically under-priced, and you’ll know if it is.

 

%d bloggers like this: