Joint Mortgage In Canada: Should You Get One?

Purchasing a house in Canada has increasingly become more and more expensive. With home prices at current high levels, homeownership is not a reality for many younger Canadians, which has fueled the popularity of joint mortgages.

Let’s dive into the details of a joint mortgage in Canada, your obligations, and whether it’s the right choice for you. 

Key Points You Should Know About A Joint Mortgage In Canada

• A joint mortgage involves two or more people applying for a home loan together and sharing the responsibilities of the mortgage contract.
• Joint mortgages can help you qualify for higher mortgages, lower interest rates, and increase your odds of approval.

What Is A Joint Mortgage In Canada?

A joint mortgage is a home loan that you take out with another person (or multiple individuals). In this scenario, you would apply for a home loan together and assume all responsibilities of the mortgage contract. 

The most common situation that involves a joint mortgage is when spouses or partners buy a house together. But friends or investment partners may also get into this type of agreement. In this case, both or all names of the parties involved are on the title.

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Loans Canada	Varies	Varies	All of Canada	- First mortgage - Refinancing - Renewal - Lender switch - Home equity loans
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nesto	$100,000+	5.34%+	All of Canada	- First mortgage - Refinancing - Renewal
Homewise	Varies	Varies	BC, AB, MB ON	- First mortgage - Refinancing - Renewal - Lender switch

Benefits Of Joint Mortgages In Canada

From cost to home maintenance, there are many perks to owning a home with another individual.

Increase Odds Of Mortgage Approval

Joint mortgages are typically entered into to increase the odds of mortgage approval. Considering how high home prices are these days, some people may not be able to get approved for a mortgage alone. In this case, they may need another person’s income to help secure the home loan. 

Secure Lower Interest Rates

Homebuyers can also use joint mortgages to get lower interest rates and better terms on a home loan contract. By combining incomes and/or taking advantage of one borrower’s better credit score and financial health, you can show lenders that you’re a low-risk borrower. 

Qualify For Higher Mortgages

Not only can you increase your odds of mortgage approval, but you may also be able to secure a higher loan amount. Entering into a joint mortgage can increase your buying power and give you more freedom to buy homes in higher price ranges. 

Easier To Save For A Down Payment

With two or more working individuals, saving for a down payment becomes easier and quicker. Moreover, with more individuals saving for a down payment, you may be able to provide more than the 5% down payment requirement. This will lower your overall mortgage, which in turn, will lower your mortgage payments.

Moreover, if you put down at least 20%, you won’t have to pay mortgage default insurance. 

Shared Maintenance

Taking care of a home takes a lot of time, effort, and money. If you can share these responsibilities, then you won’t have to shoulder the burden entirely on your own. 

All the maintenance and repairs that are required can be shared, as can all the utility bills. This will give you some peace of mind knowing that you’re not on your own with these responsibilities. 

Learn more: The Costs Of Owning A Home

Drawbacks Of Joint Mortgages In Canada

Joint mortgages are helpful for many borrowers. But there are also some potential drawbacks that all borrowers should know about before entering a joint mortgage with another person.

A Falling Out Between Joint Partners

If your relationship with the joint owner fails — whether it’s a divorce or falling out with a friend — dealing with a shared mortgage will be difficult. The house will need to be sold and the proceeds split. Or, the mortgage must be refinanced under one name, in which case the remaining borrower needs to be able to afford the mortgage on their own. 

One Person Loses Their Job

The original arrangement is dependent on both parties maintaining an adequate income to afford the combined mortgage. But if one person loses their job, this could be a major issue when it comes to paying the mortgage on time. If the person still employed cannot cover the other person’s portion of the mortgage, aggressive steps need to be taken to avoid mortgage default.

Is A Joint Mortgage The Right Option For You?

Is It Worth Getting A Joint Mortgage In Canada If My Partner Has Bad Credit?

If your partner has bad credit, it could have a negative impact on your mortgage application. One of the key factors that lenders look at is a borrower’s credit score, which is indicative of their payment history. Lenders want to make sure that mortgage payments will be made on time, but a person with bad credit may be at a higher risk of missing payments. 

If your partner’s score is less than perfect, your lender may view this negatively, which can reduce your chances of loan approval. If you are approved, your lender may offer a higher interest rate to offset the additional risk assumed, which would make your mortgage more expensive. 

Financial And Legal Responsibilities Of Each Borrower

In a joint mortgage in Canada, all borrowers share both financial and legal responsibilities equally, regardless of how ownership is divided. Here’s what that means:

Financial Responsibilities

Legal Responsibilities

Types Of Joint Ownership In Canada

In Canada, there are two main types of joint ownership for real estate:

1. Joint Tenancy

With joint tenancy, all owners have an equal share in the property. There is also the right of survivorship, which means if one owner passes away, their share is automatically transferred to the surviving owner.

Joint tenancy is more common among married or common-law couples, or close family members.

2. Tenants in Common

With a tenants in common arrangement, owners can hold unequal percentages rather than splitting it 50/50. However, there is no right of survivorship, which means a deceased owner’s share passes to their estate, not automatically to other co-owners.

Tenants in common is more popular among business partners, friends, or investors.

Learn more: Can You Buy A House With Friends?

Joint Mortgage Alternatives

Joint mortgage not the right fit for you? One of these alternative options could be the solution you want. 

Wait And Save Up A Larger Down Payment

While this will delay your purchase of a house by several years, if you can’t afford a mortgage payment on your own, you should think about saving up a larger down payment. A large down payment will not only make your mortgage payments more affordable, but a down payment of 20% or more will guarantee that you won’t have to pay default mortgage insurance.

Look Into The RRSP Home Buyers’ Plan

The Home Buyers’ Plan (HBP) allows Canadian consumers, who are purchasing or building their first home, to withdraw up to $60,000 from their RRSP account to put toward the purchase. Participants must be first-time home buyers and repay the money within 15 years.

Consider Getting A Cosigner

If you want to purchase a house and be the only official owner, consider asking a family member or friend to cosign your mortgage. It will increase your borrowing power while allowing you to be the only owner. Just keep in mind that a cosigner will be required to make a payment if you do not, this is why choosing someone close to you is important.

Consider House Hacking

House hacking is a strategy that involves generating passive income from renting out part of your primary residence while you live there yourself. This can take a few forms, such as:

• Renting out your basement
• Renting out one room in your home
• Living in one unit of a multi-family property and rent the others

House hacking can be financially beneficial in the following ways:

• Appreciation: Over time, the value of your home will increase in value. The longer you hold on to your property, the more equity you can build simply through appreciation.
• Rent Helps Pay Your Mortgage: The rent payments you collect every month can help you cover your mortgage. Depending on how much you charge in rent and your mortgage payment amounts, you may even be able to cover the full mortgage payments with rent.
• Generate Passive Income: The money you collect in monthly rent payments can free up more cash flow for you to use for a variety of purposes, including paying other debts, investing, or spending leisurely.

How To Get Out Of A Joint Mortgage

Getting out of a joint mortgage in Canada involves several legal and financial steps, depending on your situation. Here are the most common options:

• Sell The Property: In this case, both parties agree to sell the home and use the proceeds to pay off the mortgage. This is often the cleanest way to end joint ownership and financial responsibility. However, you’ll both need to agree on the sale terms, which can be tough if the relationship has gone sour.
• Spousal Buyout: If one person wishes to keep the home, they can refinance the mortgage in their name only and pay the other their share of equity. This allows one person to keep the home while removing the other from the mortgage and title. However, the remaining borrower must be able to qualify for the mortgage on their own based on their income and credit.
• Mortgage Assumption: With this arrangement, the lender allows one party to assume full responsibility for the mortgage, releasing the other party without needing a full refinance. However, not all lenders offer this option, and approval depends on financial qualifications.

Additional Reading

How Long Does It Take To Get A Mortgage Approval?

How To Apply For A Mortgage If You Have Bad Credit

How To Get Pre-Approved For A Mortgage

Final Thoughts

Joint mortgages are a great option for individuals pooling resources to purchase property. However, shared ownership means shared responsibility, so it’s important to emphasize clear communication and trust among co-owners. While joint mortgages can be a practical solution for couples, family members, or business partners, always weigh the benefits against the risks and seek professional advice.

FAQs For Joint Mortgages In Canada

Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.