Can you have two mortgages on the same apartment?
September 20, 2008 8:14 PM   Subscribe

Can I go halves in an apartment with my brother? i.e., can we each have separate loans for the same apartment? No one I've asked seems to know. We are in Queensland, Australia.

He would be paying his share off a lot more quickly than I would be able to pay my share. The plan then is that he would continue living in the apartment with me (or rent out his room) and buy a second house elsewhere.

I know this probably seems like a really simple question, but I know absolutely nothing about home loans :)
posted by mjao to Work & Money (10 answers total)
I may be wrong, but this doesn't make sense to me—if, for whatever reason, you can't cover your mortgage payments anymore, would your bank or other lender get half an apartment?
posted by halogen at 8:32 PM on September 20, 2008

Response by poster: Couldn't the bank just force you to sell, so they could recoup their money?
posted by mjao at 8:38 PM on September 20, 2008

I would think the normal procedure where two people want to purchase one asset would be for those two people to co-sign a single loan.
posted by tiamat at 8:59 PM on September 20, 2008

I don't know anything about Australia - but the way mortgages work where I'm from is that they actually *buy* the property - and then you sloooowly pay them back - and if you screw up - they get to keep the apartment! When you have a mortgage, your name is on the deed, but actually the bank owns the place in the event that you fail. So, to answer your question - I strongly doubt it. It may be, though, that a lawyer in your jurisdiction could create an agreement between you and your brother, apart from the single mortgage, that would delineate your separate rights and responsibilities in the way that you want.
posted by moxiedoll at 9:03 PM on September 20, 2008

Response by poster: Hmm, I guess that makes sense. Damn! :)

Moxiedoll, I thought maybe a lawyer could do something like that. The thing would be, my brother would pay his share off really quickly and then he wouldn't want to be left paying MY interest ... could a lawyer write something up that said I was responsible for all the interest after he'd paid off his share? Would that even work out fair for me?
posted by mjao at 9:12 PM on September 20, 2008

I wonder if you could do it with a first and second mortgage. You buy the house together in joint title. You take one mortgage, for like 30 years, he takes out a second for say, 10 years and pays it off as quickly as he would like. The second would probably have a higher rate of interest might you might be able to deal with it separately between you and your brother.

To add to moxiedoll's comment, in the US, you are the owner of the house, the mortgage holders have lien - which means they get first right to any money if you sell the house and can take control and force the sale if you don't make payments. Theoretically you would get any money left over after the lien holders were paid but that almost never happens if you are in foreclosure. First mortgage holder gets paid first, second mortgage gets paid second.
posted by metahawk at 9:34 PM on September 20, 2008

Best answer: I think that you want to have a joint mortgage, but you need to look into whether or not the two of you sign the purchase contract as Tenants in Common or as Joint Tenancy. These are the two common options in Queensland.

Trusts are also a really good way of sorting this kind of arrangement out. The trust buys the real estate and you both are beneficiaries of the trust.

Get legal advice, don't trust your Real Estate agent. The cost of the lawyer now will be tiny compared to the costs down the track if you structure things in the wrong way.

I'm in Queensland. PM if you want to talk in more detail. IANAL.
posted by dantodd at 10:14 PM on September 20, 2008

No reason you can't do this with a single mortgage. You just need an agreement with your brother as to who pays what. This is pretty simple: just use any amortization calculator. When you plug in the terms of the loan, you should get the standard schedule with the payment amounts you're supposed to make. Then, plug in the same terms with half the amount: these are your payments. Plug in the same terms with half the amount and whatever (shorter) time period he wants: these are his payments. You won't pay each others' interest. In other words, you can slice it in half on paper, and treat it as two separate loans for your own purposes, even if the bank considers it one loan.

Of course, this assumes a fixed interest rate. It doesn't take into account insurance, taxes, etc. (though I expect you'll just split those 50-50). Assumes no prepayment penalties. Also, of course, you need to work out what will happen if one of you is late or defaults. I'm sure it wouldn't hurt to run it by a financial advisor/lawyer, either.
posted by alexei at 1:43 AM on September 21, 2008

If you get one single loan, you could both make the same regular payments at first, while your brother saves up to pay off his half in a separate interest bearing account.

Once your brother has enough to cover the whole of his side of the mortgage, he puts that lump sum into the mortgage, and from then on you take his name off the mortgage and you pay ALL of the payments. This is a simple arrangement where it's easy for both sides to see that it's fair.

Of course, you need to decide together what happens if you become unable to make your payments, want to sell up, etc. etc.
posted by emilyw at 10:33 AM on September 21, 2008

Generally speaking you can't both separately mortgage the whole apartment, or even half of the apartment, without the banks becoming aware of it, either because you're legally obliged to inform them (which you are) or because they look it up in the database (which they will). Joint loans are the easiest way, if you can trust each other. You're each jointly and separately liable for the whole amount, but they'll assess the loan viability based on your joint incomes.
posted by aeschenkarnos at 3:03 PM on September 21, 2008

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