How do joint mortgages work?

Whether you’re planning to buy with friends, your partner, or a sibling, sharing a home loan with someone else can help you cut down on costs and even increase your borrowing power. This can be done through a joint mortgage.

A joint mortgage, also known as a joint home loan, is a home loan that multiple people are responsible for. With multiple people on the Certificate of Title, your share of the property will be smaller, but the savings you could make may prove to be worth it.

You can open a joint home loan with your spouse, a friend/s, a parent/s, a sibling/s – anyone that you’re happy to cohabitate with and trust.

Does a joint mortgage have to be 50/50?

There are cases when you might not want to get equal halves with another person in your joint mortgage agreement, like if you have unequal incomes. Fortunately, the problem can be solved by agreeing upon the type, or structure, of your joint mortgage.

There are two main types of joint mortgages: ‘joint tenancy’ and ‘tenants in common’.

What is joint tenancy?

Joint tenancy assigns each person in the agreement equal ownership status of the property. 

Rather than seeing it as a 50-50 split, the law recognises that, under a joint tenancy agreement, each person is entitled to 100% of the property. 

Who are joint tenancy agreements for?

Joint tenancy agreements are common among married couples or de facto spouses who have grown accustomed to sharing their assets equally. 

Importantly, if one tenant dies, the other has the right of survivorship, which means that they automatically assume the deceased tenant’s share of the property.

This overrides any wishes to the contrary expressed in the deceased tenant’s will. So if you’d rather your share of a property be passed on to someone else in the event of your death, tenancy in common might prove to be a suitable alternative.

What is tenancy in common?

Tenancy in common differs from joint tenancy, in that the share of the property each tenant has can be as equal or unequal as you agree to. That means, for example, ownership could be split 50-50, 60-40, or even 99-1. 

The division of ownership can be decided upfront by each tenant, or determined by how much each person contributes towards the home loan. 

For tax purposes, some couples may even assign the higher-income earner a smaller stake in a property they both own.

Who is a tenant in common agreement for?

A tenancy in common ownership structure might be preferable for friends or investors who are buying a property together or applicants who won’t be making equal contributions towards the mortgage and want ownership to reflect that.

You might also consider a tenancy in common arrangement if you have children from a previous marriage and would rather your share of the property default to them in the event of your death, rather than be passed onto your spouse or their family.

Unlike joint tenancy, there is no right of survivorship in a tenancy in common agreement, meaning that if one tenant passes away, their interest in the property becomes an asset of their estate.

Individual tenants will also be able to dispose of their share of the property as they see fit and do not require permission from the other tenants if they intend to sell, mortgage, or rent it out.

Joint tenancy vs tenants in common: which is right for me?

Whether you opt for a joint tenancy or tenancy in common arrangement will come down to personal preference. However, it’s a good idea to speak to a legal professional who can walk you through the risks involved in each.

They will also help you draw up a co-ownership agreement that outlines the rights and obligations of each co-owner. This will cover things like who will occupy the property, how repayments will be made, and what happens if one person wants to sell when the others don’t. Without this, you could become mired in costly litigation if a dispute arises.

Paying off a home loan is more than just a home loan deposit and monthly repayments. There may be other homeownership costs to consider, too, such as:

• Home insurance premiums.
• Council rates or strata fees.
• Maintenance costs.
• Property management costs, if it's an investment property.
• Lenders fees, such as monthly or annual fees.
• Stamp duty, conveyancer fees, and settlement fees when you first buy the property.

It's important to discuss how each of these expenses will be covered between the owners. This way, everyone involved has a clear understanding of their financial responsibilities. 

After all, a home loan is a significant debt, and money troubles can be taxing on any relationship. All obligations should be clearly defined beforehand, including what to do if a problem arises or one party wants to get out of the joint mortgage.

As joint home loans are an agreement to share a home loan, all co-owners must agree on what happens when someone wants to remove themselves from it.

To get out of a joint mortgage, you have to get the other owner/s to agree to buy out your share of the property and organise a mortgage transfer (aka ‘transfer of equity’).

It’s advisable to hire a solicitor or seek legal advice, as the road to leaving a joint mortgage agreement can be fraught with complications.

When one co-owner in a joint mortgage passes away, what happens to their share of the property will depend on whether you had a joint tenancy or tenant in common agreement in place. 

As mentioned earlier, under a joint tenancy agreement, the other owner/s have the right of survivorship. This means they will automatically become the new owners of the late tenant’s share. 

Under a tenancy in common agreement, the deceased’s share of the property becomes an asset of their estate. 

New home buyers have a lot of things to consider, and these can be tricky if you're buying with a partner. But it's important to prepare for worst-case scenarios and discuss these ahead of time so that you and your partner can navigate property problems together.

Before you get a home loan with a partner, ask each other questions like:

• What happens if one or both of us lose our incomes? Do we have financial safety nets, like income protection insurance or life insurance?
• Will we refinance at some point?
• How will we pay for renovations? What sorts of changes to the property do we want to do, if any?
• What happens if one of us dies? What happens if we both die?
• Who inherits our shares of the property?
• What happens if the property gets damaged?
• Do we need home insurance?
• If buying with your partner, what happens if we separate, break up, part ways, or divorce?
• How will our ownership change, if at all, during retirement?
• If we're living in the home together, who else (if anyone) lives with us?
• If we're renting out the home as an investment property, who does the property manager contact with problems? Who arranges for repairs or inspections?

Talking about some of these topics may be tough, but it's important to agree on these things beforehand. Having plans in place or wishes known can save you and other people a lot of headaches later.

Applying for a joint mortgage is much the same process as applying for a regular home loan. The main difference for a joint home loan is that you’ll need the paperwork for each of those involved as well, not just your own.

1. Save for a home loan deposit.
2. Research and apply to any possible home loan grants. 
3. Run a credit check.
4. Get all your home loan application documents in order.
5. Compare home loans.
6. Apply for a home loan (or pre-approval).
7. Make an offer on a property.
8. Go through home loan settlement.
9. Congratulations! You just bought a property together.