As a couple, you share everything, even shirts. Or not? What about money? And the mortgage? Applying for a mortgage as a couple has its advantages and disadvantages.
Here we are going to help you see them all to make the best decision in your case, but as a spoiler, 79% of Spaniards take out a mortgage as a couple , according to the study on “ The profile of the Spanish mortgage holder ”, carried out jointly by Fotocasa, UCI and Hipotecas.com. Now you will understand why.
Advantages of applying for a mortgage as a couple
Do you remember what happened to your finances when you started living with a partner and sharing expenses? Yes, they increased because where before there was only one salary to pay for everything, suddenly there were two.
Something similar happens when buying a house as a couple . Since there is more money, you can aspire to a better home than you could buy on your own. It's that easy.
This also applies to mortgages. One of the advantages of applying for a mortgage as a couple is that you can access a higher loan amount because there is a relationship between your salary and the house you can afford.
One of the requirements that entities look at before granting you a mortgage is your debt ratio . As a general rule , the maximum debt you can take on will be between 30% and 35% of your income . Again, if this is double, the installment to pay and the amount of the mortgage will be higher .
Be careful with this point, though, because it can make you buy a more expensive house than you thought just because you can . Think carefully before stretching your mortgage numbers to the limit. A good mortgage expert can help you with the math.
A better house, a bigger mortgage and possibly a better mortgage with better terms . Being two will give you much more flexibility when looking for a mortgage and negotiating the terms, especially those of the loan's discounted products.
For example, it may be enough for one of the two to have their salary deposited. You can also play with the amount of life insurance linked to the subsidized mortgage that each one assumes, although remember that with a good mortgage that is just that, a mortgage and nothing more, you will not have to do this. Precisely for this, mortgages without associated products exist.
And finally, it will be easier for two people to get a mortgage because your financial stability and security will be greater . Banks like to see that there are two salaries instead of one to support the loan and to meet the installments. This is what is known in finance as diversifying risks and, as you will now see, it is also one of the first disadvantages of a mortgage for two people.
Disadvantages of applying for a mortgage as a couple
We just told you in advance: Not everything was going to be rosy in a mortgage for two .
With a mortgage between partners, the responsibility falls on both sides and both parties must jointly assume the responsibility . What does this mean? That if one party cannot pay, the other party will have to do so, whether or not you are a couple.
The mortgage will outweigh the couple and even the marriage if you break up . The end of your love story will not affect the loan you have taken out, nor will it affect the ownership of the house. If the couple breaks up, you will still have to pay the mortgage every month , exactly as if you were still together.
From there, there are always options such as selling the apartment to pay off the mortgage, one person buying it from the other, terminating the joint ownership or even renting the apartment. In reality, what you do with the property will have little bearing on the loan as long as the installments continue to be paid.
What you should know before signing a mortgage as a couple
Beyond the advantages and disadvantages of taking out a mortgage for two and buying a house, there are three issues you should keep in mind to avoid potential problems in the future.
The first is what happens if one party contributes more than the other as a down payment . In this case, unless it is a marriage under a community property regime, the ideal is that the percentage of ownership of the house reflects the real effort of each party .
In other words, if one person contributes more than the other as a down payment, they will have a larger percentage of the house. This strategy can even be applied to the percentage that each person assumes of the mortgage, although this is less common.
The second is to do the same with donations and aid from parents . In fact, if this is not done, the Treasury could come to understand that the donation has been made 50% to each of the members of the couple and that would mean paying more taxes for the donation.
The third issue is to be clear about what can happen if one party stops paying the mortgage . Although we do not like to think of the worst, these things happen and it is better to know the consequences in advance.
As we have already told you, the obligation to pay is joint and several . If one does not pay, the other will have to. It is that simple and crude. In fact, this is something that also applies to the guarantors of the mortgage. If you do not pay, they will have to do so.
This is something important to keep in mind if you were planning to involve your parents in a joint mortgage.
Now that you know the advantages and disadvantages of a mortgage for couples, you can choose the option that best suits you.