For many married couples, purchasing a home is a very significant topic. When applying for a mortgage, what should you keep in mind? Can you cohabit? Here are some suggestions for married couples purchasing a home.
Calculation of the affordability of buying a home
Generally, mortgage lenders do not make a distinction between married and unmarried borrowers. Especially in the cases of newlywed couples, the affordability of the wedding is an imperative consideration. If one of the partners will receive a lower or no salary shortly due to family planning, the mortgage framework could be lowered.
A retired couple may also face affordability issues. As a result, spouses receive a pension that is only 150 percent of the pension that a single person would receive. In other words, pension income is usually insufficient to support. The “marriage penalty” has a negative effect in the affordability calculation. The tax burden on two gainfully employed individuals after getting married is often higher than when they lived together as single people.
Mortgage obligations are shared by married couples
In most cases, married couples need to sign their mortgage contract together. Hence, each spouse is responsible for paying mortgage interest and amortization costs with assets and income. The property is usually financed by both partners, but this is not unusual. The reason for this is that real estate is currently very expensive.
Make sure the property type you choose is suitable
Couples buying real estate can choose from the following forms of ownership:
- Sole ownership: A single party owns the property
- Common ownership: Both parties own the property
- Joint ownership: Each party owns the property based on the amount they contributed financially
How does a divorce affect the mortgage?
The mortgage can be continued in the event of separation in several ways.
- Selling the property or terminating the mortgage: Mortgages can be terminated before the end of their contractual terms. Banks are entitled to compensation in this case, called early repayment penalties. The amount of compensation will vary depending on how long the remaining term is.
- Continuing as-is: Despite only living on one side of the property, the mortgage remains in its original form.
- One of the partners takes over the mortgage: The sole owner of the property can be one of the partners if one can afford the mortgage alone. The bank must, however, make a positive credit decision to make this possible.
- Mortgage transfer to a new property: A new property can be acquired after the first property is sold. If the first property has a loan, it can be transferred to the second property.
Be careful when choosing joint mortgages
To find the most suitable mortgage, you need to conduct extensive research. Mortgages are usually long-term investments. The most effective approach is to look at various mortgage models and interest-rate scenarios, weighing all their advantages and disadvantages. By doing so, you will be able to determine what’s most relevant to you in a mortgage.