Joint tenancy defines any situation where two people share a home. Typically, ownership is established by looking at the names on the deed, so one person can technically get a mortgage when two people are seen as owners. However, if you have two names on title with one on the mortgage, you may be responsible if the mortgagee stops paying and risks foreclosure.
TL;DR (Too Long; Didn't Read)
You can have two names on the deed but only one on the mortgage, but the mortgage will need to be paid each month for both parties to maintain ownership.
Joint Tenancy Mortgage Loan
Joint tenancy mortgage loans are typically for homebuyers whose finances are shared, such as married couples or life partners. In this case, acting as co-borrowers on a loan makes sense. If you apply as a couple, though, your credit scores will be combined to determine whether you qualify. If one co-buyer has poor credit, lenders will often recommend putting just the person with better credit on the loan application.
If you later choose to take a loan against joint property, you may be able to do so without the co-owner’s consent. This is up to the lender, of course, but if you’re the person whose name isn’t on the mortgage, it’s important to be aware of this possibility. The person whose name is on the mortgage is the one obligated to pay the loan. However, if the borrower stops paying, the lender could come straight to the other homeowner for payment to avoid foreclosure.
Homeownership Versus Mortgage
Having your name on neither the mortgage nor the deed would put you in a tough position. You could be putting part of your earnings toward helping pay for the house, only to be left high and dry if things don’t work out. With two names on title, but only one on the mortgage, you have the same protection without the obligation to pay the debt. But keep in mind that the bank may come after the other owner for payment if the home approaches foreclosure.
When you’re looking at a loan against joint property, it’s important to distinguish between ownership and debt. Ownership is established by the names on the deed, not the names on the loan. The loan is between you and the bank, while the deed is held by the government to officially show ownership of a property.
Ownership Rights and Mortgage Loans
If you have two names on title one on mortgage, it’s especially important to have a legal contract like a will that protects the owner who is not on the loan in case the borrower dies. The house should transfer to the other person on the deed if the other person dies, but it can help avoid complications to have it all spelled out.
A loan against joint property does not magically disappear if the person named on that loan passes away. The person remaining in the home will still need to continue to pay to keep the home. In some cases, this may mean refinancing the loan to lower the monthly payments, which means you’ll have to qualify based on your own debt-to-income ratio.
Taxes and Joint Ownership
When it’s time to file taxes, not having your name on the mortgage will put you at a disadvantage. Owning a home brings tax benefits, but this is related to the interest you’re paying on your mortgage each month. In 2019, for instance, you can deduct the interest you pay on up to $750,000 of personal residence debt.
If you have a joint tenancy mortgage loan, but your name isn’t on the mortgage, the other person will get to claim that interest. If the person whose name is on the mortgage is your spouse or life partner, this may not be a big deal. However, if you’re living with a friend or relative, putting money toward that payment each month without tax benefits could be annoying.
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.