People rarely purchase big-ticket items such as homes and cars with cash, if ever. The prevailing mode of payment is usually by bank loan, even though the instalments these days aren’t affordable either. To accelerate the process of homeownership, young couples tend to opt for joint loans using their dual-income status to improve their chances of securing a bank loan.

However, there are dangers associated with joint loans. As a borrower, you are not only committing to making payments over the duration of the loan tenure. Your relationship with your partner is equally important, as can be seen in the complications listed below:

One stops paying

Your partner stops paying his or her agreed portion of the loan instalment. Does that mean you are the sole owner of the house, now that you are servicing the loan completely?

According to Chur Associates managing partner Chris Tan, if the title of the property is registered in the name of both the partners individually, the non-paying partner is still the owner of the house. Even though your partner is no longer making payments, he or she has a claim over the property. 

One pays less

Your partner decides to pay less than the agreed portion of the loan instalment. This scenario is the same as the one above. Hence, when entering in a joint loan with a partner, you not only need to consider your ability to pay your part of the instalment but your partner’s portion in the event he or she fails to uphold the end of the agreement. A joint loan is not only a test of your financial strength but also a test of the bond between you and your partner. 

Transferring the title

Can the ownership of one of the partners be transferred to the one who is servicing the loan by himself or herself? Chris has this to say: “You need the consent of the financing bank before you can transfer (the title) and most of the time, it is a fresh loan application that we commonly referred to as refinancing.”

And if there are more partners?

Is the process any different if there is a joint loan among three to four people, and one person stops paying? Tan said that without a proper partnership agreement in place that deals with the exact circumstances, all the partners still need to deal with the ownership issue expressively. From the perspective of the bank, it is a joint liability of all partners to pay for the loan and that the property charged to the bank remains intact and a good security.

Chris Tan Chur Pim has been a practicing lawyer since 2000, and he founded Chur Associates in 2003. 

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