Buying a home can be done by an individual or two persons, and up to six applicants. If you are somebody who doesn’t have an income that can afford a home loan by yourself, you may want to consider the pros and cons of a joint loan. If the pros outweigh the cons for you, it is certainly an option worth looking into.
When obtaining a joint loan, banks usually insist that co-owners be co-borrowers, yet it is not necessary that all co-borrowers be co-owners. This is often the case if your credit isn’t up to par and a parent or family member wants to help you purchase your first home and puts their name on your loan, yet lets you keep the house solely in your name.
When it comes to who is on a joint loan and who has joint ownership, the question of tax benefits often comes up. If you are only a co-borrower and not a co-owner, you do not benefit from the tax breaks. Conversely if the co-borrowers are co-owners of the property then the tax rebate will be available in the proportion of their share in the loan. This is why going into a co-borrowing and co-ownership agreement must be looked at carefully beforehand. Discussions about the tax benefits should also be looked at. If both parties are paying into the home equally and own the home equally, then they should split the tax benefits on the same basis.
When repaying a joint home loan, it is similar to the process of paying a loan as an individual. The difference is that you would not write two checks to the mortgage company but instead create a joint account that both parties contribute to where one check is made from that account. This process is also a good way to track contributions and payments.
If one of the co-borrowers and co-owners does not need the tax write off, the other borrower can make all of the payments and claim the full tax benefits – if both agree upon it.
The downside of having joint ownership comes if one of the individuals dies. The property may have to be probated. Probate is a court-supervised collection of the deceased’s property, payment of liabilities, and distributions of their property to beneficiaries and heirs. One can potentially work around probate with living trusts, life insurance policies or a joint ownership of property with a right of survivorship. One should speak to a financial advisor or tax professional regarding such matters before entering into a joint ownership agreement, even if the couple is married.
Other pitfalls of joint ownership can occur if a parent co-owns a home with one child and then dies. If the family has only one child and co-owns a home, the child will immediately inherit their parent’s half of the house. But, if there are more children in the family, the parent may request that the proceeds of the house be evenly divided between siblings. Joint ownership overrides the obligation for the child who jointly owns the house to honor this request. The house immediately passes to the surviving owner upon the parent’s death and siblings may never receive whatever entitlements to the house their parents may have desired for them.
Buying a home with a joint applicant can help a first time home buyer get their foot in the door and afford a more expensive home than they could afford alone – therefore, weigh the benefits and speak to professionals to see how a potential joint-ownership can benefit you.Immobilienmakler Heidelberg Makler Heidelberg
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Source by Ron Scott