I earn the higher salary, so assume my contribution will have the biggest impact. Should I just buy it on my own (and apply for a home loan on my own) or should we do it jointly?
We are not married, so is that going to be a problem? Also, what are the benefits of applying with someone else compared to on my own?
A: A joint loan generally enhances the application’s affordability, provided both applicants earn an income. Co-applicants can be a married couple, family (siblings, aunt, uncle) or even friends.
Having a co-applicant will help if your income should reduce and the mortgage repayment could then be paid by the other applicant. Clients are also able to split the bill which assists in collecting the monthly instalments.
Of course, there are pros and cons and a joint home loan is not suitable for all.
Pros: More applicants for a loan can increase your chances of qualifying for one as both parties’ income and expenses are taken into account to assess your application and affordability. This means that the disposable income may be greater. Having a higher combined income threshold allows you to look at a property that you might not be able to afford on your own. There is a greater chance that the loan will be approved based on multiple applicants.
Cons: If there is a default on the loan, all parties to the loan will be impacted in terms of credit bureau and liability and future eligibility for credit. If you are not married to your co-applicant, you may want to consider future eventualities and the impact this may have on your home loan.
Should one partner want to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability. If the original terms of the agreement need to be varied, for example, further lending or cancellation, then all parties to the loan need to concede.
Should one party to the loan not meet any of the requirements or conditions, all parties may be impacted, for example, if life cover for a party is required for one of the applicants, then the registration may not proceed until the requirement is met. In the event of death or divorce, the intricacies can become complex. – Buyisile Maseko, growth head at FNB Home Finance