Many couples find that the emotional commitment of taking out a mortgage together can make the family a stronger unit. In the absence of a traditional marriage, this is a move that solidifies a relationship in very tangible ways. If the two of you have always had your own homes or have lived in a home owned by just one person, there is a certain division that disappears when you both co-own a house.
On a practical side, a joint mortgage application can help counter any weaknesses in one partner's credit or finances. How? The mortgage application pools both borrowers' debts and income into one combined calculation. So if your income is too low to qualify for the amount you want, adding in your partner's income could bump up the numbers. Similarly, one partner with fewer debts could lower the total debt-to-income ratio.
Finally, there are also financial considerations. When only one unmarried partner is on the mortgage, only they get the tax benefits from deducting allowable expenses at tax time. Sharing the responsibility also means both persons could benefit regardless of whether they file taxes jointly or not. And if the home appreciates in value, both owners will be in a position to benefit from the increased profit when they sell.
The Cons of Joint Mortgages
Of course, entering into any financial commitment with another person always carries some personal risk. While many couples have a long and happy life together, others may not make it long-term. If something happens to the relationship, you'll be stuck with a house and a mortgage. Remember, both borrowers are equally liable for the debt no matter who lives there, who has a job, or what breakup may occur.
Adding another person to your mortgage application also may not help you qualify for the loan you want. If one person's credit history is just average but the other's is poor, the additional borrower's credit may cause the whole application to suffer. The same could happen if you add a second income but it comes with an additional set of unrelated debts.
To be sure, partners need to be on the same page about finances. How much debt are you each comfortable with? How will each party contribute their monthly share? How will tax benefits be used? What if both persons don't earn an equivalent income? Should a cohabitation agreement be drawn up? What if something goes wrong? Without these challenging conversations, trouble may follow any changes in life.
Clearly, the pros and cons of sharing a mortgage cross all categories: emotional, relationship, and financial. The best place to start making your decision is to learn more about the joint mortgage process and how it applies in your particular circumstances. Doing so can help start important conversations about the emotional and personal consequences of taking on this new responsibility.
Secure One Capital
can help. Our team of experienced finance professionals will work with you to determine how both partners may affect the application and what other options you may have. We will answer your questions, both as individuals and as a couple. Call today to make an appointment.
