The pros and cons of a joint home loan application

August 13, 2020: At some stage in life, everyone aspires to have a home of their own but circumstances such as not earning enough income to qualify for a facility can often come in the way.

Fortunately, banks such as the First National Bank Ghana allow couples to submit joint applications using their combined incomes for a home loan to realise their dreams of buying a house or building one.

Eligible individuals (such as parent and child, siblings, etc) may also apply for the joint home loan, subject to terms and conditions.

The Executive Head of the Home Loans at the First National Bank Ghana, Kojo Addo-Kufuor explained that a joint application can help increase your chances of qualifying as both applicants’ incomes are considered to assess the affordability based on their disposable income.

“Before applying for a joint home loan, you should be aware of the advantages and disadvantages to avoid any pitfalls,” says Kojo Addo-Kufuor.

Pros:
•    There is a high likelihood that the home loan application will be approved if both individuals have a good credit record.

•    You can afford to buy a property that one partner would not ordinarily afford with their salary alone.

•    You could benefit from a good interest rate as affordability assessment is done on both parties.

Cons:
•    If the relationship does not work, the repayments on the property still need to be made.  This can be an issue if the parties are no longer in contact.

•    When there is a default, both partners’ credit records are affected.

•    Should one partner want to pull out of the transaction in an unfortunate situation, a new application will have to be processed and a full credit assessment conducted for the application to verify affordability on the main borrower. The one remaining in the transaction will "Pay off" and the facility will be rebooked in the remaining party’s name. This is because all the collateral documents are in both names.  

The one taking it in alone must have the income to take on the full loan or after they pay off, the one remaining will take a lower amount this time in his name only.  

In addition, the home loan facility will be closed, which means you will have to pay re-registration and/or legal fees for the new home loan facility. Simply put, both parties are jointly and severally liable for the repayments on the loan until the loan is paid off, this remains the case.  

It is worth noting that during the application process, both parties need to sign all the necessary documents such as the offer to purchase, home loan quote, legal documents and repayment requirements.

Most important, the monthly repayment must 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 repayments.

“Buying a property is a big commitment and the decision to buy with someone should not be taken lightly. The parties need to work out all the eventualities before taking ownership as shortcomings could potentially set you back financially,” concludes Kojo Addo-Kufuor.

The key point is that two people applying do not automatically qualify.  The relationship must be proven as permanent, in addition to all other requirements, before the application can be qualified for the facility.