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Purchasing a house in Canada, whether you live in a big city or a smaller town has increasingly become more and more expensive. As homeownership is no longer a reality for many younger Canadians, it’s unsurprising the joint mortgage has gained popularity.

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 mortgage 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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Can You Get A No-Down Payment Joint Mortgage In Canada?

There’s technically no such thing as a no down payment mortgage. You must still make a down payment, though the funds don’t necessarily have to come from your savings. Instead, you would use borrowed funds as your down payment.

Keep in mind that if your mortgage is insured (which means you make a down payment of less than 20% of the purchase price), you may not be able to use borrowed money for your down payment.

In Canada, three major providers offer mortgage default insurance: Canada Mortgage and Housing Corporation (CMHC), Sagen, and Canada Guaranty. Of the three, only Sagen and Canada Guaranty allow borrowed money for a down payment. CMHC does not allow this.

Sagen And Canada Guaranty Down Payment Source Options 

If your mortgage is insured by Sagen or Canada Guaranty, you may be able to borrow money for a down payment from the following sources: 

  • Personal loans. With a personal loan, you can borrow a lump sum of money to put towards your down payment.
  • Lines of credit. A line of credit is an account that lets you withdraw money from, up to a certain credit limit.
  • Credit cards. If you have a credit card, you may be able to use a cash advance to get access to money for your down payment. 
  • Monetary gifts. Both Sagen and Canada Guaranty allow you to use money from family or friends to be used for a down payment. However, the money must not be a loan. You may need to provide your lender with a gift letter proving that you don’t have to repay the money gifted to you. 

Both Sagen and Canada Guaranty require that the repayment of funds be included in your Total Debt Service (TDS) ratio calculation.

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Pros Of Joint Mortgages In Canada

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

Increase Odds Of 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. They may need another person’s income to help secure the home loan. 

Secure Lower Interest Rates

Not only that, but homebuyers 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 with 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. 

Cons 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

Whether you’re married or just friends, relationships end. Dealing with the end of a relationship and a shared mortgage will be difficult for many reasons. The house will need to be sold or the mortgage refinanced under one name. And one person 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, the house may need to be sold to avoid mortgage default.

Is A Joint Mortgage The Right Option For You?

Joint MortgagesNon-Joint Mortgages
OwnershipCo-ownership by two or more individuals.Single ownership by one individual.
Number of BorrowersRequires two or more borrowers.Only one borrower is required.
Income ConsiderationCombines incomes of all borrowers for eligibility.Only the borrower’s income is considered for eligibility.
LiabilityAll borrowers are equally liable for the mortgage debt.Sole borrower is solely liable for the mortgage debt.
Decision MakingJoint decision-making on mortgage-related matters.Sole decision-making rests with the borrower.
Down PaymentCan pool resources for a larger down payment.Down payment is solely the responsibility of the borrower.
Default RiskAll borrowers are equally responsible in case of default.Sole borrower bears full responsibility in case of default.
Relationship ConsiderationOften chosen by couples or family members purchasing property together.Typically chosen by individuals or sole property owners.

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. 

Further, if your partner doesn’t keep up with their share of the mortgage payments, you’ll be liable to make up for them yourself.  

What Is 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.  

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 $35,000 from their RRSPs 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.

What About An Income Property?

While this is not allowed in all cities, purchasing a house with the option to rent out part of it to create an income can help certain borrowers afford more expensive homes. Some lenders will approve mortgage applications based on the borrower’s ability to earn an income with the property.

Final Thoughts

Joint mortgages are a great option for individuals pooling resources to purchase property. They offer advantages like larger loan amounts and easier qualification criteria. However, shared ownership means shared responsibility. 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.

Joint Mortgage FAQs

Can I add someone’s name to my mortgage?

If you own a house and wish to add someone to the mortgage, you have to wait until  renewal time. Or you may choose to refinance your mortgage. Although refinancing your mortgage before the end of your term does come with fees, so typically this is not the best idea.

Who can I get a joint mortgage with?

You can enter into a joint mortgage agreement with anyone, as long as they also qualify for a mortgage. @ question Can I turn a joint mortgage into a single mortgage?

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

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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