Are you unmarried, shacking up with your partner, and wishing to apply for a mortgage? Don’t worry, there’s a chance for you. For all intents and purposes, you might even be offered more options than married couples.
Many people believe that only spouses can get a joint mortgage. But that’s not true. Marriage isn’t a condition for getting a mortgage. Most banks even give hope to up to four people at once! If they meet all the conditions. And if they’re fine with having only a partial share in the property. But let's be specific.
Joint effort, or go solo?
If you’re unmarried and considering a joint mortgage, according to the Česká spořitelna website, you have two options.
One of the couple takes out a mortgage
The first option is that one of the partners signs up with the bank. If he or she has adequate income and savings amounting to ten percent of the estimated price of the property for which he intends to go into debt. Of course, the other partner can also contribute with their savings -provided they don’t mind that they won’t be the sole owner of the property. On the upside, they won’t be the debtor either.
The couple takes out a joint mortgage
The second possibility is that the couple takes out a joint mortgage, as though they were married. In this case, we are talking about a partner mortgage, in which each partner will own a share in the property specified in the contract (it doesn’t have to be fifty percent). However, both will also be listed in the register of debtors and responsible for the entire debt! Not only part of it (in the amount of their share). This may prove to be a complication in the future, when trying to get more potential loans.
Mortgage for a married couple
Just for comparison, in exceptional cases, one of the spouses can apply for a marriage mortgage alone. For example, if he or she is burdened with debts or is subject to maintenance obligations for dependent children. In this case, the spouses cannot do without a notarial act on the reduction of the scope of the joint property of the spouses.
Two are better than one
According to statistics, unmarried couples usually take out mortgages together. The reason is purely pragmatic. When it comes to the bank's assessment of a client's creditworthiness, two incomes are better than one, which means the couple is more likely to get a mortgage. The conditions for obtaining mortgages are relatively strict and one income is usually not enough.
Personal experience: Joint mortgage and a breakup
"We took out a joint mortgage at the age of twenty-five, at a time when we weren’t married yet. We each had some savings, which covered the necessary ten percent of the purchase price of the property. And two incomes came in handy. We appreciated the opportunity to live in our own place. Basically, the same amount that we had been spending on rent until then covered our monthly payments. So far, we are satisfied, but we’ll see what happens in the future. Hopefully, we’ll stay together and repay the mortgage,"
30-year-old Jana says with a laugh.
Jana opened a very important topic. An unmarried couple should think very carefully about what will happen with the mortgage in the event of a breakup. The story of 32-year-old Lukáš can be regarded as a raised warning finger. He took out a mortgage together with his partner Lucka. But after a year, the couple broke up and hell ensued.
"Neither of us wanted to get rid of the property, but we didn't want to live together either. In the end, we sold it and split the money from the sale. This also covered the instalments up until now.”
Forty-year-old Jirka was even worse off. In his case, the mortgage was written on his partner, Jana - despite the fact that he invested a large part of his savings in it and also contributed to the monthly instalments. But then he broke up with Jana and the property was assigned only to her.
"I was stupid not to sign a contract with her. But you know how it goes. Love is blind and doesn’t take paragraphs into consideration. Unfortunately, I lost my savings. And my dream home, too,”
Jirka hit the nail on the head. What happens with the mortgage and the real estate in the event of a breakup must be agreed upon contractually.
"Otherwise, the property will automatically go to the person who applied for the mortgage, and the other will not have any claim to it. Make sure to impose the barriers as accurately as possible to avoid potential problems,”
points out lawyer Tomáš Junkvirt.
How to increase your chances of getting a mortgage?
Getting a mortgage isn’t easy today. Often even a double income is not enough to reach it. Fortunately, there are ways to increase your chances. According to the server rovnejto.cz, one of the possibilities is to mortgage another property. You don’t even need to be the owner - the property can belong to a third party (parents, grandparents). Provided they agree to it, of course.
If you don’t have savings in the amount of twenty percent of the estimated price of the real estate, required by banks as a condition for the provision of a loan, and you have concluded a building savings contract, you can use a so-called bridging loan. However, it is not as advantageous as getting an actual mortgage. The monthly loan repayment consists of early repayment and a loan repayment without including a principal repayment. Therefore, it is always more of a temporary solution.
Choose a longer payment period
You can also increase your chances of getting a mortgage by applying for a mortgage with a longer payment period, which automatically reduces your repayments.
How to avoid mistakes when getting a mortgage
Many people make a lot of mistakes on the path that leads towards getting their own home.
"One of them is choosing the wrong bank. A mortgage is a product like any other and not all banks offer the same conditions. You can encounter both advantageous and disadvantageous mortgages. It is therefore in your interest to compare the offers of individual bank houses. There are various Internet portals that will help you with that,"
advises reality expert Jakub Stuchlík.
Don't look only at interest rates
Interest rates are just one of the items you should focus on.
"You should focus primarily on the APR, i.e. the annual percentage rate of charge, which includes interest and other costs associated with the loan. The APR is therefore always higher than the interest itself,"
confirms financial advisor Jan Hladký.
Read the conditions thoroughly
Some banks release money at once, others gradually depending on the stage of the building process. In that case, it is necessary to document all expenses to the bank, which can be quite tricky. There is also a risk that your funds won’t be released in time.
Have you estimated your expenses correctly?
Another problem is an incorrect estimation of expenses. In short, the borrowed amount doesn’t cover them. Experts generally recommend having at least 1.2 times (ideally 1.5 times) the amount you money you currently need.
Determine the amount of instalments correctly
“Be careful with setting the amount of instalments, too. High instalments may reduce the payment period of the mortgage, but are you sure you can afford them?”
Jan Hladký asks a rhetorical question.
Don't underestimate non-payment insurance
You should not underestimate the insurance against the inability to repay, you never know when you’re going to need it.
Preferential financing of sustainable housing
Are you planning to build an environmentally friendly home? Apply for a so-called green mortgage. If the property meets the ecological requirements, you will have a chance at a cheaper mortgage. The so-called Green housing loans are currently provided by ČSOB and Hypoteční banka, which favour projects built using modern energy-saving technologies and environmental standards. Meaning energy-efficient and built from ecological materials and using environmentally friendly technologies.
What to say in conclusion? Even a joint mortgage can be a risk, or a bet in the lottery. Before closing one, make sure to give some thought to with whom you’re signing up with the bank. We don’t want to look on the dark side, but breakups can sometimes be cruel. And financial problems won't make the situation any better. Well, good luck then!