Paying a mortgage and legally owning a home are two separate processes. The former does not constitute the latter. In most scenarios, the mortgage payer or payers will be the legal owners of the home, named on the title deed. However, in some situations, two people may elect to share ownership of a home without sharing responsibility for the mortgage. There are distinct advantages and disadvantages to this approach.
One name on the mortgage
A sole mortgage is not in itself unusual. Many single people have a sole mortgage. The advantage of a sole mortgage is that the mortgage holder is solely in control of the payments, so they don’t need to worry about other people losing their jobs, for example. Some people, even if they are living together and jointly paying the mortgage, may elect to have the mortgage in one name. For instance, if one person has a poor credit score, it may be better if the other applies for the mortgage individually in order to get a better rate based on their better score. This approach is balanced out by the fact that the lender will offer a lower loan, as they calculate the amount they lend based on total earnings.
Two names on the title
The title deeds are official papers that are lodged with the Land Registry. These prove ownership of a property or land. Having one’s name on the deeds guarantees certain rights, such as occupancy rights, the right not to have the house sold or let while occupying it. Having two names on the title simply means both parties named are legal owners of the property.
Disadvantages of the arrangement
For the mortgage payer, the main disadvantage is that they are solely responsible for the payment of the mortgage, but do not have full control of the property. For example, if they lose their job, they could not put the house up for sale without the permission of the other person named on the title, even though that person doesn’t necessarily pay toward the mortgage. However, there are separate legal agreements that can be brought into play to mitigate this, although these may be invoked at the request of the lender and actually diminish the rights of title holders. Another disadvantage for the non-mortgage payer is that they are jointly responsible for household bills and liabilities. For example, gas bills, television licence and even legal responsibility for injuries sustained to visitors.
Advantages of the arrangement
The advantages of having two names on the title are not solely received by the non-mortgage payer. For example, a mother can ensure that her child is the sole beneficiary of any house sale in the event of her death, by naming them on the title. While this financially benefits the child, the peace of mind for mum is obvious too. The main advantage of being on the title only, as opposed being named on the title and mortgage agreement is that the title holder enjoys occupancy rights, regardless of their contribution to the payment of the mortgage.