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Joint mortgage: pros and cons
The joint loan is an option often chosen by couples buying a home in joint ownership of property.
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Now, before we start, I think it is essential to explain that in Italy, when people get married, the couple can decide whether to have a joint account or a separate one. So, it is very common here that wife and husband have their own bank accounts.
If you are buying a property, one option you should take into account is the joint mortgage. But how does it work? The application for a joint mortgage needs to be made by at least two people, who can be husband and wife, cohabitants or just co-beneficiaries. Since both joint holders are paying the loan, they will both result in being the owners of the house when the loan is paid off.
Just be aware that the co-beneficiary is not the same as a bondsman. The first one is on the same level as the account holder, while the second has to pay only in case the main holder turns out to be in default.
Those who choose the joint mortgage can take advantage of the opportunities given by this option. At the same time it is important to know all implications, the good and the bad ones.
All pros of the joint mortgage
1. Easier to get the mortgage
It is no coincidence that a joint mortgage is mostly chosen by young couples, especially if they are buying their first home. When you have just started your life as an adult, you might not have many resources, so asking for a joint mortgage can be the solution. The co-beneficiaries can submit their joint revenues and guarantees to get a higher amount of money for their loan.
2. Lower payment, higher amount of money
With a joint mortgage, you could pay a higher installment amount than what you could have afforded being alone. But you could also decide to pay standard, therefore feeling less of the burden of the monthly payments.
3. Joint mortgage: two separate bank accounts
Applying for a joint loan doesn’t necessarily mean that you have to share the same bank account. If the beneficiaries have two separate accounts, the payment will be charged on one account only.
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Key considerations before applying for a joint mortgage: understanding the drawbacks
1. Shared responsibility
When agreeing to take out a joint mortgage, one should be aware that all co-owners are equally responsible for the payment of the mortgage. Should the relationship or ties between the co-holders change, this responsibility remains.
2. Joint mortgage and legal separation
In case of a separation, all co-owners remain responsible for the payment of installments even after separation and until a bureaucratic solution is found to release one or more co-owners.
3. Joint mortgage and death of one on the co-owners
What happens to a jointly owned mortgage if one of the two policyholders dies? In this case, the responsibility falls on the other joint holder, who will still be liable for the payment of the installments. In the event of the death of one of the joint owners, the heirs may also take over the debt or be required to sell the house to settle the outstanding debt. In this case, there are several possibilities depending on what is stipulated in the mortgage deed and the wil.
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4. Difficulties in the separation of property
In the event of separation, it may be difficult to divide the house if it has been purchased with a joint mortgage.
5. Takeover of the joint mortgage
In the event of a couple break-up, the solution may be for one of them to take over the mortgage. This solution is often preferred to avoid new expenses. The one who keeps the house and continues to pay the mortgage can in fact take over the co-tenant's share of the mortgage without having to remake the mortgage deed, thus avoiding paying the notary's fee and the bank paperwork, among other expenses.
6. Insurance protection
It is now possible to take out insurance policies to protect against unforeseen events that may occur when taking out a joint mortgage. Ad hoc policies protect in the event of the death of the joint tenant, but also in the event of loss of employment or acquired disability.
In general, it is important to carefully weigh the pros and cons before deciding on a joint mortgage and to discuss possible separation or death scenarios with a financial or legal professional.
Why wait? Get in touch with our agents at Engel & Völkers and fix an appointment to visit the most beautiful houses for sale Lake Maggiore.
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