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Thinking of doing a joint home loan? Read this first

Posted In: Money Talk

While we all aspire to own a home not everyone can afford one. But would you consider applying for a home loan with someone else?

There’s no denying that chances of having a joint home loan are high as both your income and expenses are taken into account to assess the affordability based on your disposable income. But you should weigh in the advantages and disadvantages of this big step. Below are prs and cons you should consider first:

Pros:

  • There is a high likelihood that the housing loan application will be approved if you both have a good credit record.
  • You can afford to buy property that one partner wouldn’t necessarily afford with their salary alone
  • You could benefit from a good interest rate as affordability assessment is done on both of you.
  • You are only liable for half of the bond payments and legal fees.

Cons:

  • If you are not married, you will share ownership of the property with another individual once paid off.
  • If there is a default, both partners’ credit records are affected.
  • Should one of you wants to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment will be conducted on the application to verify affordability.
  • Upon the approval of the home loan, the bank may require both of you to have adequate life cover that will be ceded onto the bond.
  • Most importantly, the monthly debit order has to come from one account. As a result, this will have to be agreed beforehand to ensure that there are always funds available to avoid defaulting on the monthly bond repayments.

Buying a property is a big commitment and the decision to buy with someone else should not be taken lightly. Both of you need to work out all the eventualities before taking ownership as shortcomings could potentially set you back financially.

Would you consider buying a loan with someone else? Share with us on the comments below:

 

Words: Dr Simphiwe Madikizela, Head of Special Projects at FNB Housing Finance. Source: FNB

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