How Does a Joint Tenancy Mortgage Work?

Joint tenancy is when two or more people get a mortgage together to become equal co-owners of a home. The most common example of joint tenancy in Canada is between spouses or common law partners.

What is a joint tenancy mortgage?

A joint tenancy mortgage gives all parties to the agreement an equal ownership of the home, as well as equal responsibility for the mortgage payments.

More importantly, the co-owners in a joint tenancy (as opposed to tenants-in-common) have the right of survivorship. This means that if one co-owner dies, their share of the home goes directly to the remaining co-owner(s) and can’t be transferred to a third party via a will, which avoids probate fees.

Note that with a joint tenancy mortgage, all parties who are on the property title will need to sign the mortgage agreement.

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How a joint tenancy mortgage works

Joint tenancy mortgages work the same way most mortgages do. Potential mortgage lenders will decide if you and your co-applicant(s) meet the qualification requirements. To do this, the lender will look at things like credit scores, overall income and the debt-to-income ratio of each person.

Remember that as joint tenancy mortgage holders, each person will own an equal share of the property (and beis on the property title). Furthermore, each person on the mortgage will bear an equal responsibility to make the monthly payments.

This will likely not be an issue for a married or common-law couple, but it could be an issue for parents who get a joint tenancy mortgage with an adult child. Even when there’s an understanding that the child will make all the payments, the parents will be held responsible to make up any missed payments.

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When a joint tenancy mortgage makes sense

Married couples generally choose a joint tenancy mortgage because they both want equal ownership of the home and, more importantly, they want the remaining spouse to have automatic full ownership of the property (via right of survivorship) if one of them dies. Parents and grown children who want equal ownership of a home might also opt for joint tenancy, however, the right of survivorship is not as straightforward because it can be challenged by the other beneficiaries of the estate.

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Pros and cons of a joint tenancy mortgage

Pros

Cons

Joint tenancy vs. tenants-in-common

The main difference between tenants-in-common and joint tenancy is that tenants-in-common does not include an automatic right of survivorship.

If a tenant-in-common dies, their ownership share of the property does not go automatically to the other co-owners but rather becomes part of the deceased person’s estate. The deceased’s portion of ownership in the property will then be dispersed according to the instructions in their will.

One important detail of joint tenancy mortgages is that a joint tenant can unilaterally decide to convert a joint tenancy to a tenancy-in-common. This may be an option in the event of a divorce where a spouse does not want their ex to automatically inherit the house when they die.