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.

  • Lily Torres

    my understanding, and i could be wrong but hopefully @Home Loan Experts xperts can clarify, but if title is held as “Tenancy in Common” or ” JOint Tenants” then you could be made responsible for the loan. In the event the Title is held as “Tenancy By Entirety” (which is rare), then upon the Loan owners death and as long as you are not a “guarantor”, the house is yours free and clear of the debt of the loan. I could be wrong about this, please check it out further.

  • Lily Torres

    my understanding, and i could be wrong but hopefully @homeloanexperts:disqus xperts can clarify, but if title is held as “Tenancy in Common” or ” JOint Tenants” then you could be made responsible for the loan. In the event the Title is held as “Tenancy By Entirety” (which is rare), then upon the Loan owners death and as long as you are not a “guarantor”, the house is yours free and clear of the debt of the loan. I could be wrong about this, please check it out further.

  • Lily Torres

    the spouse should have or would have obtained some kind of written authorization for him to take out a loan (refi) with you on the loan… for whatever reason, Maybe he needed a cash out… but either way should had to been notified and agreed to it, because your tax records get looked at as well. If none of that was done, then it is very possible some people were not doing their job diligently and legally as they should’ve been

  • Ann Thompson

    In the mortgage papers it says that any borrower who cosigns the mortgage but does not execute the note is cosigning this mortgage only to mortgage, grant and convey that borrowers interest in the property and is not personally liable on the note under this mortgage. I signed the mortgage but no where does my name appear on the note. My husband is the only listed borrower and signed on the note. Does this mean I am liable to pay the remaining amount on the loan? And if so what happens? Do they forgive the rest of the loan because he’s deceased?

  • Ann Thompson

    I meant to say am I not liable to pay the remaining amount?

  • Lily Torres

    Hi, @disqus_BmrqviH56d:disqus don’t take my word for it, you will want to find out for sure with the bank where the loan was made
    If it is a promissory note and you signed it I believe that bank could attempt and try to hold you liable to pay the mortgage in the event your spouse passed. But, if the promissory note is your husband only and you are NOT a guarantor on the loan, they should not be able to, depending on how the title (dee) is held. Some states are different, I live in CA and don’t think they use ‘tenancy by entirety’ option, or at least most co-owners never use it due to lack of knowledge. If your husband is terminally ill you may want to make sure your property records, loan papers, deed etc are in order before he passes, especially if you have any children, as that is their inheritance.
    Good luck!
    I hope @homeloanexperts:disqus can answer your questions and shed more light on this.

  • Hi Ann & Lily,
    Yes Ann you would be liable for the entire loan. I’d strongly recommend you seek legal advice as this sounds like a serious matter.

  • incorrect; if you own a property jointly then 1 person can borrow against their share of the property without consent of the other. but the bank/lender can only recover that person ‘s share if they go into default. then a bank/lender has no rights to the other person’s share of the property. They can sell up the property but will have to hand back 50% of the value to the other owner ( subject to any private agreements between the joint owners as to percentages owned)

  • Tony Mazz

    I bought a rental with my two brother in laws, all are in different circumstances, they are now looking to place a mortgage on the property. If one of the parties doesn’t sign the mortgage can it still be registered on the property?
    One of the parties paid their share in cash, so no need for mortgage financing.
    The future plan is to take the mortgage financing and buy another property but in the meantime as rates move north, the other parties want to lock the lower mortgage rates….etc.
    What advise can you suggest…. thanks

  • Hi Tony,
    Both parties (all owners) must consent for a mortgage to be put on the property.
    The best solution is to allow any party to borrow up to 80% of their share of the property. E.g. if the property is worth $1,000,000 and is owned by two people then either could borrow $400,000 on the property. They can choose to have fixed or variable as they see fit. Each person can have their own loan account. Normally the loan accounts are in all names so you have to agree among yourselves as to who has which account and you need to trust each other as each can withdraw from any account. Some lenders allow you to have your own loan accounts in your own names however it is very complex and you are all joint and severally liable anyway so it doesn’t make much of a difference.

  • Lyn

    We are building 2 duplexes on 1 building agreement with 2 different owners, how do we finance half the project? Would the bank approve a loan for half of the project on a single building agreement?
    If not, what’s the best way to finance half? Equity release/line of credit requires a specific reason for the money. Therefore we can’t tell them it’s for half a building., prohibiting the possibility of a construction loan- I assume. If we say investment they will provide an investment loan only.

  • Hi Lyn,
    That’s a little unusual. Let me just make sure that we understand this fully:
    – Noted it is one building contract with two people on it as owners.
    – Are you building a duplex (2 properties) or two duplexes (4 properties)
    – Is the land already subdividided with you each owning a block OR is it one block with you each owning 50% of the block?
    – When complete will it be subdivided?
    Thanks

  • Lyn

    Hi,
    Thanks for your reply.

    It’s 2 Torrens title blocks, where we will do a lot reallocation and build 2 x side by side duplexes/semis side by side. Currently they are 2 semis/duplexes front to back.
    The project entails levelling of the 2 houses and rebuilding 2 new duplexes on the block.

    Problem is, the builders do it on one agreement, one price for the 2 new constructions.

    Issue with a construction or property loan of sorts, is the financier won’t finance half a development.

    That leaves a line of credit loan, but with that the bank want to know what the money is for with their new, responsible lending criteria and APRA regs.

    Thanks

  • Hi Lyn,
    We have some lenders that can release equity relatively easily so there may be other options there. I’m not 100% understanding what your plans are, we really need to know exactly who owns what percentage of what and how much you need to borrow to be able to give you a useful reply. It’s best that you speak to a mortgage broker about it due to the complexity. I’ll email you and cc one of our mortgage brokers who understands construction well.

  • Reginald

    Hi,

    If I wanted to get a home loan as a joint account with my son who lives in Australia and me living overseas. My income is overseas and we have PR.

    Will that be OK to meet the banks regulations for residency?

    Thanks in advance.

  • Hi Reginald,
    Yes some banks will be ok with this. However there are a few potential problems e.g. foreign citizen stamp duty may apply on 50% of the purchase price as you have not been in Australia for the last 200 days. This would depend on the state that you are in. So it may be best to buy in your son’s name only if possible.

  • Reginald

    Also note that my son and I have PR

  • Yes if you are PR but have not been in Australia for the last 200 days then some states still charge the foreign citizen stamp duty.

  • Reginald

    I go and back and fort between my home country and Australia because I work in my home country. So I can’t say I haven’t lived in Australia for 200

  • No problem. You could also buy 90% in your son’s name and 10% in your name. With some of our lenders that allows us to use your income however you would avoid most of the foreign citizen stamp duty.
    If you’d like our help then please call Jef on 1300 889 743 and he can assist you further.

  • Anoynomous

    My husband and sister owned a home prior to our marriage.
    His sister agreed and allowed us to borrow 150k in home equity as tenants in common to buy our own home and allow the property to become a rental income property.
    It was agreed that my husband and I only were the only ones listed as borrowers on the mortgage.
    Brother and sister now do not reside on property, what should be owed to his sister as profit from the rent? And is she responsible for 50 percent of house expenses as long as we pay the loan?

  • Serena

    I cosign for a property and the other borrower is in default by six months going into foreclosure can I give him a 30 day notice to get out of the property and pay it current myself. Thank you please help

  • Joe

    Hi

    My home is owned outright with my mum . I would like to leverage equity for a deposit for an investment property. I have PR and on good income, and mum doesn’t and has moved back overseas. Is this possible?

  • Hi Joe,
    This is a challenge but it may be possible depending on your situation. We’d use a guarantor loan https://www.homeloanexperts.com.au/guarantor-home-loans/

  • Joe

    Thanks in advance. Does guarantor loan still apply even if my name and my mum’s are both on the title?

  • Hi Joe,
    This would depend on the lender. You can structure in two possible ways:
    1. You and your mum borrow against the property for you to use as a deposit
    2. Guarantor loan
    Either way your mum needs to be part of the loan as she is an owner of the property. The best choice for structure would depend on your mother’s situation and the lender chosen. Our mortgage brokers would know the best way forward.
    A 3rd option is that you buy your mum’s share off of her.

  • Adam Dean

    I have an odd situation…my ex girlfriend and i purchased a home in 2013..we used a major lender. She is unemployed so we had to use my job history and credit..We both signed our loan applications stating the title will be held in both our names..So the lender draws up a contract of Tenants in Common where we are shared owners…Now..5 yrs later we found out in family mediation that her name is the only one on the deed. I was served w/ an Unlawful Detainer in Dec..Lender is telling me there’s nothing they can do. I have made 100% of all mortgage payments and 100% of all improvements to the home. Our contract states that we are Tenants in Common.. I signed the note and the security instrument and all other paperwork. Me and my 3 children may be forced to move this Thurs because of a huge mistake our title company did. They failed to respect the terms of our contract. It also an FHA loans which requires me to be on title (since we are not married and not relatives) and that their policy..My attorney is keeping my head above water but what should we do?

  • Dee De

    Hello, I was inherited properly (in the state of California)by my grandparents, and my uncle and I own equally 50% of it. He currently lives in the property and doesn’t want to sell it. I was wondering is there a way I could sell my half or get a loan towards my half.

  • Joslyn Lewis

    If married, is it possible to borrow against a house to consolidate debt under just one name or do both parties have to consent?

  • Hi Joslym,
    It’ll depend on whether both parties are on the title/loan or not. If they both are on the title but not on the loan, then both parties need to give consent however only one partner is both on title and loan, then consent isn’t required from both parties.

  • Vanessa Robb

    Hi my husband and i have recently purchased a block of land and the title and loan for that is in both names. Is it possible for my husband to take out the construction loan for the build in his name only?

  • Hi Vanessa,
    If the title is in both names, then you both should be for the construction loan too. The reason is because it’s risk for the bank as they want all the legal owners in the home loan. The opposite is possible though, title on one name but you both could be on the loan but it isn’t applicable in your case as you both are on the land title.

  • Lanika Graham

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