Joint Tenants vs Tenants in Common
Getting your feet on the property ladder can be challenging because of the costs involved. However, there are ways around this. An attractive option when investing in real estate is to buy with other people. In this way you are able to join your finances together, increase the size of your deposit, and make joint payments. So if you have a group of family members or friends that you trust to partake in a major real estate investment, it is possible for you to purchase a property under joint tenancy.
A joint tenancy involves a group of people sharing one mortgage to cover the value of the entire property. Technically, the mortgage is split because you all pay an equal sum out of the whole. However, each person has a one hundred percent stake in the value of the property. There are several conditions you will have to adhere to under a joint tenancy:
- In the event of a death, that individual is unable to pass their share onto a person in a will.
- If you decide on selling the property, you must all come to a mutual agreement.
- A married couple that owns a property together are considered as joint tenants.
Tenants in Common
With a tenancy in common, each person can own a share of the property, and it doesn’t have to be an equal share. For example, you can own 50 percent of the property, while your two children own 25 percent each. There are not as many restrictions with tenants in common:
- If anyone dies, they are entitled to leave their share of the property to whoever they choose in their will.
- Although this is rare, there is a possibility that each owner is able to mortgage their part of the property separately.
- There must be a unanimous agreement if you want to sell the property.
This type of ownership is generally used by relatives or friends who are buying a property together.
You should always bear in mind that any type of joint ownership, whether tenants in common or joint tenants is always going to be risky. If one person decides that they want out, you are all going to have to move. Therefore, you should spend time weighing up the pros and cons of a joint agreement.