How does a joint home loan application work?

A joint home loan application involves two or more individuals applying for a mortgage together. This is common among married couples, siblings, and family members purchasing a property together. Joint applications can increase borrowing power but also create shared financial obligations.

In a joint application, the incomes of all applicants are combined for TDSR calculations - and MSR where applicable, such as for HDB flats and Executive Condominiums purchased directly from developers - potentially allowing a higher loan quantum. For example, if one applicant earns S$6,000 per month and the co-applicant earns S$5,000, the combined income of S$11,000 is used for affordability calculations. However, the existing debts of all applicants are also combined, which can reduce borrowing capacity if any co-applicant carries significant financial obligations.

All joint applicants are jointly and severally liable for the mortgage, meaning each person is individually responsible for the full loan amount regardless of their ownership share. If one borrower defaults, the bank can pursue any or all borrowers for the full outstanding amount. A missed payment by one borrower also affects all applicants' credit profiles.

The LTV limit is determined by the profile of the most restrictive borrower. If one applicant already has an outstanding housing loan, the more restrictive LTV and TDSR limits applicable to a second loan will apply to the entire joint application.

For HDB loans, all applicants listed in the flat application must be co-borrowers, and at least one must be a Singapore Citizen. For bank loans, MAS regulations require that every borrower must be a mortgagor (owner) of the residential property, and every mortgagor must be a borrower or guarantor. This means co-borrowers generally must also be co-owners on the property title.

Age is an important consideration. The maximum loan tenure is typically calculated using the Income-Weighted Average Age (IWAA) when there are multiple borrowers of different ages. IWAA considers each borrower's age and income to compute a weighted average age: (Borrower 1 Age × Borrower 1 Income + Borrower 2 Age × Borrower 2 Income) ÷ (Total Combined Income). This weighted age then determines the maximum tenure, which cannot extend past age 65 for HDB loans (with 25-year maximum) or age 75 for bank loans (with 30-year maximum for HDB properties and 35-year maximum for private properties). Where there is a significant age gap between applicants, IWAA can help younger co-borrowers extend the available tenure.

Common ownership structures include joint tenancy, where all owners hold equal undivided shares and the property passes automatically to the surviving owner upon death, and tenancy-in-common, where owners can hold unequal shares that form part of their individual estates upon death.

Cashew's advisors help joint applicants understand the implications of different ownership and borrowing structures, ensuring both the legal and financial arrangements are optimised for your situation.