Call us now 1300-889-743

One Borrower, Two Owners

What happens if you own a property jointly with someone else, but only one of you wants to get a loan on that property? It’s more common than you think and most banks just aren’t set up to handle it.

What do the banks think?

  • One person can borrow on a jointly owned property.
  • All parties must consent to the loan.
  • All parties are joint and severally liable for the loan.
  • Every loan is considered based on its individual circumstances.
  • Many banks will not accept this home loan structure.

Do you need help getting your home loan approved? Call us on 1300 889 743 or fill in our free assessment form and our specialist mortgage brokers will help you.

One group of people, many different directions

Usually this situation arises because people own a property together, but have different goals or different risk appetites which causes them to seek a loan in just one name.

Some common examples we see:

  • Friends buy investment properties together, but later one wants to keep investing but the other doesn’t.
  • Groups of 5 – 10 people buying a small apartment block together as an investment.
  • Brothers and sisters who have inherited a property, but then want to do different things with it.
  • A guarantor loan arrangement where one person borrows against a jointly owned property to buy another property for themselves.

It is possible for all of these groups to allow one member of their group to borrow against their property, however everyone needs to consent and be aware of their obligations.

Not all banks will assist with this type of loan, the key to success is to apply with the right bank.

The property share solution

One solution is to use a loan known as a ‘property share loan’. This has some unique features:

  • Each borrower can have their own loan account that only they can access.
  • Each loan account can be in different names.
  • The loan is secured on the property that is jointly owned.
  • Everyone is joint and severally liable for each other’s loans.

Example: Suppose a brother and sister buy a house together for $1,000,000. The sister has a deposit of $200,000.

The brother has no deposit but a higher income.

They may own the property 50% each yet the sister has a loan of $300,000 and the brother has a loan of $500,000, both secured on the property.

Do you need help with your home loan? Our mortgage brokers are experts in helping people with unusual ownership structures.

Call us on 1300 889 743 or fill in our free assessment form and we’ll get back to you with some options.

Yes, everyone needs to consent

Let’s imagine you own a property together with four other people

Three of you want to borrow against that property, but the last person doesn’t.

In this case, you’ll need the last friend’s consent to apply for the loan.

This just makes sense, what if you were to experience financial hardship and had to sell the property? It’s not fair on your friend if they have to sell their property because of a loan they never consented to and possibly didn’t know even existed.

Joint and severally liable means you’re all liable

If you’re on the title of a property but you are not a borrower on the loan then the bank can’t expect you to make repayments right?

Wrong.

When the loan is set up you’ll be a mortgagor and a guarantor for the debt. That means that the bank can call on you to make repayments if the borrower fails to do so.

What about if you all have your own loan accounts? As long as you pay your loan account then surely you are ok?

Again, wrong.

If one person doesn’t make their repayments, the entire loan is in arrears.

The loan is in default of the contract so the bank has the right to demand repayment of the loan and to begin taking recovery action. The banks can make a claim on you for the other person’s missed payments!

It’s important that you choose who you borrow with very carefully!

Don’t be a guarantor for someone else’s loan unless you know the potential consequences and believe they’ll meet their obligations.

Seek legal advice before entering into any joint and severally liable loan.

Do you need help with your mortgage?

Our mortgage brokers are experts in helping people with unusual ownership structures.

Call us on 1300 889 743 or fill in our free assessment form and we’ll get back to you with some options.

  • TylerD

    If there are 3 parties, each with their own loan accounts, will it be okay as long as 2/3 of them are making the repayments regularly and on time every time even if the 3rd one is missing payments?

  • Hey TylerD,

    Unfortunately, if even one of the parties doesn’t make their repayments, the entire loan is in arrears. The loan is in default of the contract so the bank has the right to demand repayment of the loan and t begin taking recovery action. Even if 2/3 of the parties have been making regular mortgage repayments, the bank can make a claim on you for the 3rd person’s missed payments.

  • Kylie

    My brother is applying for a home loan and has asked me to co sign. He has the wage to back it however because he used to be a sole trader, he doesn’t have the pay slips to back it. He is now on a wage as the business has changed in to a trust. The lender has advised that in 12 or so months, he can refinance and I can come off the title with no problems. Is this correct?

  • Hi Kylie,
    A lender will see that the business is related to him and will assess him as self employed. There are some lenders who have flexible income verification for self employed borrowers, you can read this for more info https://www.homeloanexperts.com.au/low-doc-loans/alternative-income-verification/
    It’s better he apply on his own if he can. It can get complicated in terms of removing your chances to get a first home owners grant in the future. He may pay stamp duty to remove you off of title. It’s just best avoided if you can. That being said it may be the right option, we haven’t assessed your situation so we couldn’t be sure.

  • raekwon_3

    Simple question but hard to find an answer on the internet: defacto relationship, loan goes in 2x names instead of one. Im wanting to confirm the obvious, will this be a loan with more borrowing power and less fee’s as a result?

  • Hi Raekwon
    Assuming you’re both working then yes you’d have more borrowing power. As far as I am aware the fees on the loan would not be affected.
    As a general rule having two borrowers is better than one for getting approved as well because you’d have a higher credit score for your application https://www.homeloanexperts.com.au/credit-score-home-loan/how-does-credit-scoring-work/
    This is because if one person loses their job / has a life event of some kind then the other still has an income.

  • Ann Thompson

    What if a husband obtains a home equity loan without the consent or knowledge of his wife? Her name is also on the deed. Does the wife have legal recourse after his death when she discovers the loan?

  • Hi Ann,
    He would have needed her to sign something. So potentially the bank did not identify her correctly. I’d recommend that you make a formal complaint with the bank and seek legal advice as this is a serious matter.

  • Leanne

    If two people are on the title of a property, can one person take out another mortgage to buy another property using the first property as collateral without the consent of the other (50%) owner ?

  • Hi Leanne,
    No, both parties must consent.

  • Leanne

    OK I will need to talk to the bank that provided the mortgage then to find out how this happened.

  • Shelly N Todd Good

    I am on the deed to my home along with my husband. our house is paid off. I have been getting calls from Bank of America, they will not speak to me about what is owed, for I am not on the loan. did not give permission for my husband to use our property nor did I sign any papers allowing him to do so. just got served papers m Superior Court, My name is listed on the court documents, I am being sued for pay-off of this loan. I called the debtor, they still will not speak to me. They are suing me for pay back of this loan but I am not aloud to know details. I am aloud for my husband to give permission, but If he does not I have no way of knowing the amount owed against my house. I guess my first question is how does someone put up a property that has two owners without two signatures and is it legal?
    .

  • Shelly N Todd Good

    if they did not consent and it was done, what is the next step?

  • Lily Torres

    After my divorce in 2012 my ex-husband decided to remortgage/take out a brand new loan in January of 2013 on the house and he did so without my my consent. In actuality he even forged my signature to obtain tax records from the IRS in order to be approved to refinance on the house. From which he took a large sum as a cash out. However in order to do so he had to take out the loan by himself and I was not nor am I a guarantor on the loan. Now however, in 2017 he wants to FORCE me to sell the house and I need to know what are my rights. I am certain that because he owns the loan by himself, and I am not a guarantor that I am not responsible for that loan if he were to default. Sadly, I am sure that I would lose the house because I cannot afford to pay the loan for him. If I had the financial resources to do so I would but that is one of my biggest concerns. The title is still under both of our names as 50/50 co-owners. However on the divorce decree it says that as the petitioner of the divorce I live in the house and we both agreed/signed this divorce paperwork. So, I need some legal representation. I know that what he’s doing is wrong and I sympathize with the fact that he owns that loan and he should be responsible for it but he cannot just force me to sell the house because at this time it is inconvenient for him.
    If there is anyone who could please give me some advice I will really, truly & gratefully appreciate it. Thank you!

  • Lily Torres

    Hi @disqus_80SuvT1ziw:disqus , what is the current outcome of your situation?. I hope you were able to resolve. Sounds like something that legally should have not taken place, happened anyway. Its not right. I hope everything is ok for you.