There are no obstacles for non-married couples to apply for a joint loan. Most banks calculate the cost of living identically, irrespective of whether the couple is in a partnership or marriage.
Two persons applying for a loan for the purchase of real estate can be considered as one household. Creditworthiness can be determined at the same level as for marriage. However, not all banks have a uniform approach. – There are financing institutions that treat a partnership as two separate households.
The result is a higher monthly cost of living
This, in turn, causes a decrease in creditworthiness, Every credit advisor should know about this, it is especially important in the context of the client’s credit preparation.
Whether a loan is being applied for by marriage or an informal couple is not important for assessing the bank’s risk. Some banks, however, will assess the creditworthiness of marriage more favorably than the couple forming an informal relationship. Risk assessment is even more difficult for single people.
Generally, banks assess people who are in a formal or informal relationship better, because the risks related to, e.g. loss of work, health and life are divided into two people – says Piotr Firlej and gives an example that in one of the largest banks a couple of borrowers who are in an unmarried marriage and dependent children, with a total income of USD 5,000 net (loan period 30 years), has creditworthiness of USD 480,000. For a couple who are in an informal relationship in the same financial situation, it is already USD 420,000.
What if parting?
I always discuss with clients all possible options for obtaining financing and their consequences in the future. If two people join the loan, you must always take into account that sometime in the future, even if today they do not allow this idea completely, they can decide to part.
In such a situation, you can apply to the bank for permission to release one of these people from the loan obligation. The bank will assess whether the person who is to remain the sole debtor has the same creditworthiness as the basis for repayment of installments on their own.
As Good Finance advisers explain, when installments were repaid late, consent to such an operation is unrealistic. The same applies to divorces. This process is also always accompanied by the abolition of joint ownership of the real estate. This must be done before a notary public – very often this involves mutual settlements.
It is worth remembering the legal consequences in the event of the death of a partner. If no will has been made, the other person remains with the problem of communicating with the partner’s heirs, because they inherit his shares. In the case of a will, it’s important to know that you have inheritance and gift tax.
After exceeding the amount of USD 20,556 it amounts to USD 2,877.90 + 20% from the surplus over USD 20,556. In the case of inheritance of shares in real estate encumbered with a mortgage, the mortgage tax will be calculated on the value of the share, but after deducting the loan amount that falls on the purchase of that share. Then it may turn out that there will be no tax at all.
Sometimes a partnership is better
In the case of a classic loan with no subsidies, a non-married couple has more flexibility in terms of purchasing real estate. It is possible that, for example, one person owns an apartment, but both – the borrowers.
However, one should know that the percentage of shares does not release the installment from its solidarity. This means that if one of the borrowers does not pay the installments, the other one has this obligation and it does not matter that he may not have a share in the property at all.
In the Flat for the Young program, if two applicants for a loan want to be the owner at the same time – they must marry. The creators of the program admit that the owner may be a marriage or a single, but not two people in an informal relationship. If the partner would like to be the owner he must get married before applying for a loan.