If you want to buy a property with another person and take out a mortgage together, it will be called a joint mortgage. In this post, I will talk about some technical and legal issues related to this solution.
You will find out:
- what is a joint mortgage
- the legal aspects of a joint mortgage
- what is the policy of banks in Poland towards joint mortgage?
- what in case of divorce / split-up?
A joint mortgage is a term for accessing a mortgage with another person(s). The borrowers are jointly and severally liable for the loan, which means that everyone on the loan is responsible forthe entire liability.
The most common case – a couple taking out a joint mortgage
This is the most common case – two people who are partners, run a common household, want to buy a property and take out a mortgage.
The purchased real estate will be shared by 50/50. It is possible to split shares differently e.g. 30/70, but remember, both borrowers are jointly and severally liable for the loan. This means that if some day your partner goes out to buy cigarettes and never comes back, you will have to pay off the loan yourself. If you have borrowed 400k together, the bank will require you to repay the entire amount borrowed and may seek to satisfy the claim from all of your assets and income.
Formal / informal partnership – it doesn’t matter
It doesn’t matter to the bank whether the couple requesting a joint mortgage is married or in an informal relationship. If you are married, Polish banks require you to join the loan together by default. This is due to the fact that under the Polish law spouses have joint property (from the moment of marriage) and each spouse is fully responsible for the obligations contracted by the other party.
It should be noted that this applies to marriages contracted in Poland. I don’t know what would be the approach of Polish banks in a situation where the marriage was entered under the law of another country (and it’d certainly make an interesting case).
If the marriage was concluded in Poland and for some reason only one of the spouses wants to join the loan, it is enough that they both go to a notary and establish a division of property (marriage contract). From that moment on, the spouses’ property is separate, they purchase assets and they account for the liabilities incurred on their own – the bank will not require them to participate in the spouse’s loan.
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Divorce? – not with a bank
What in case of divorce or break-up (if you are not married)?
In the case of divorce, the court may divide the property of the spouses, but the loans remain shared. If you do not want to sell the apartment, you can try to remove one of the borrowers from the loan.
The bank will check whether the borrower who is to take over the repayment is creditworthy. Even if his or her earnings suffice to repay the loan on his or her own, the bank doesn’t have to agree. It’s always better for a bank to have two borrowers with income than one. You can also try to add a new borrower (let’s say a new partner) instead of the previous one.
If the current bank doesn’t agree to get the name of one of the borrowers off the loan, the solution may be to transfer the loan to another bank (remortgage). Based on a contract (or a divorcesettlement), former partners can arrange that one of them will buy the loan share of the other for an agreed amount. Banks allow for the possibility of granting a loan in such a situation and the application procedure is the same as for a ‘standard’ mortgage loan. This is likely to be the best solution from the point of view of safeguarding the interests of both parties.
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Joint mortgage with more that two borrowers – also possible
The case described above, when two people running a joint household share a loan, is the most common case of a joint mortgage.
However, more than two borrowers can co-sign a mortgage, too. In most banks, the maximum number of borrowers is four, but there are banks that allow up to six borrowers (Alior, ING, PKO BP) and those that don’t set any limit (Pekao, Santander).
Why four (or more) borrowers at all? Most often it is the lack of creditworthiness. Additional borrowers can have higher incomes and ‘help’ people who want to buy a property but lack creditworthiness on their own. In most cases these ‘additional’ borrowers will be parents, who in this way support children in getting a loan.
Not all of the borrowers have to be real estate buyers. Most banks in Poland apply the rule that at least one of the borrowers must become the owner of the credited real estate. Thus, parents can join the loan with their children, but only the children will purchase the property.
Individuals who are not relatives and who do not have a common household can also apply for a loan together. For example, two friends want to buy a property as an investment. They will state in the loan application that they run separate households. The bank will double the cost of living (two households) to calculate the creditworthiness, so applicants must have a total income slightly higher than if they ran a common household.
If you have any additional questions about joint mortgage or other issues related to taking out a mortgage please write to me at: kamil@polishmortgage.pl
I also recommend other articles that may be of interest to you:
Flat renovation / finishing works. Can I finance it by a mortgage?
What documents an EU citizen needs to apply for a mortgage in Poland?
