Joint mortgages for married couples

Post date: Tuesday, November 7, 2023

In Japan, the number of households with dual-income couples is increasing, and more and more housing loans are being taken out by married couples. Rather than applying by one spouse alone, combining the income of both spouses can increase the borrowing amount, and depending on how the loan is structured, both spouses may be able to receive the mortgage deduction. Here, we will explain how to take out a housing loan as a couple, what to check, and what to look out for in choosing the right one.

How to Take Out a Housing Loan for a Married Couple

There are 3 ways to take out a housing loan for a married couple as follows:

1. Two individual mortgages (with joint ownership and equal responsibility)
2. Combined income (joint ownership type with equal responsibility)
3. Combined income (guarantor mortgage type)

Let us take a look at the features of each method, and also check out the points of concern such as repayment obligations, group credit life insurance, mortgage deductions, and ownership percentage.

1. Two individual mortgages (with joint ownership and equal responsibility)

In this method, each spouse signs two housing loan contracts to purchase a single property. Since each spouse is the debtor, they are obligated to repay their borrowing amount, and each of them becomes a guarantor of the other's loan contract.

Key Points of the mortgage

■ Number of Contracts and Expenses

Since there are two contracts, each of them requires its own expenses (stamp fee, commission fee, and registration fee).

■ Group Credit Life Insurance

Each of them will take out a group credit life insurance. If the husband dies or becomes severely disabled, his mortgage will be repaid by the group credit life insurance, but the wife's mortgage will remain.

■ Mortgage Deduction

Both husband and wife are eligible for the mortgage deduction.

■ Percentage of Ownership

The house will be jointly owned by the husband and wife. The percentage of ownership is determined according to the ratio of each other's investment (down payment + mortgage repayment).

2. Combined income (joint ownership type with equal responsibility)

The couple's income is combined to be screened for a mortgage. In this method, it will be one mortgage contract. One of the spouses is a “principal debtor” and the other is a “joint debtor”, and both spouses are equally obligated to repay the mortgage. In the unlikely event that one of the spouses is unable to repay the loan, the other debtor is obligated to repay the mortgage.

Key Points of the mortgage

■ Number of Contracts and Expenses

Since there is only one contract, only a principal debtor requires its expenses.

■ Group Credit Life Insurance

Only a principal debtor will take out a group credit life insurance. It is important to note that many mortgages provided by private financial institutions do not allow a joint debtor to take out a group credit life insurance. Some financial institutions may allow a joint debtor to be insured as well. Flat 35, which is a long-term fixed interest rate housing loan provided by the Japan Housing Finance Agency, is one of them.

■ Mortgage Deduction

Both husband and wife are eligible for the mortgage deduction.

■ Percentage of Ownership

The house will be jointly owned by the husband and wife. In principle, the percentage of ownership is determined according to the ratio of each other's investment (down payment + mortgage repayment), but the couple can freely decide the ownership percentage such as based on the percentage of each other’s income. Determining the percentage of ownership without regard to the amount of investment may be subject to gift tax.

3. Combined income (guarantor mortgage type)

The couple's income is combined to be screened for a mortgage. In this method, it will be one mortgage contract. One of the spouses is a “debtor” and the other is a “guarantor”. In the unlikely event that one of the spouses is unable to repay the loan, the guarantor is obligated to repay the mortgage.

Key Points of the mortgage

■ Number of Contracts and Expenses

Since there is only one contract, only a debtor requires its expenses.

■ Group Credit Life Insurance

Only a debtor will take out a group credit life insurance.　A guarantor is not eligible to be insured.

■ Mortgage Deduction

A guarantor is not eligible for the mortgage deduction.

■ Percentage of Ownership

The house will be owned only by a debtor, and a guarantor has no percentage of the ownership.

How to Take Out a Housing Loan for a Married Couple - Summary

	1. Two individual mortgages (with joint ownership and equal responsibility)	2. Combined income (joint ownership type with equal responsibility)	3. Combined income (guarantor mortgage type)
Number of Contracts	2contracts	1 contract	１contract
Group Credit Life Insurance	Each spouse to be insured	Only a debtor to be insured ＊Some financial institutions may allow a joint debtor to be insured as well.	Only a debtor to be insured
Mortgage Deduction	Both spouses to be eligible	Both spouses to be eligible	Only a debtor to be eligible
Ownership percentage	Jointly owned by both spouses	Jointly owned by both spouses	Owned only by a debtor

How to Choose a housing loan for a married couple

Who is desirable for the type of Two individual mortgages (with joint ownership and equal responsibility)?

This type is recommended for couples who both have stable income, both are healthy and eligible for group credit life insurances. Each spouse can have a mortgage deduction and the benefit of tax savings. If the wife is likely to quit her job and lose income due to childbirth or childcare, this is not recommended because the wife will continue to pay the mortgage but will not be able to have the mortgage deduction, which will be a heavy burden on her.

Who is desirable for the type of Combined income?

If there is a possibility that one of the spouses may quit his/her job in a few years and lose income, we recommend a type of Combined income rather than Two individual mortgages. Since it comes with only one contract, only one spouse is responsible for the various expenses.

・Joint ownership type with equal responsibility

The advantage of Joint ownership type with equal responsibility is that each spouse can have the mortgage deduction. However, few financial institutions offer this type of mortgage, so it is necessary to confirm whether the financial institution of your choice offers this type of mortgage.

・Guarantor mortgage type

If you have Joint ownership type with equal responsibility as your option, Guarantor mortgage type has no advantages over the other type. If you have your choice between Two individual mortgages and Guarantor mortgage type, Guarantor mortgage type is recommended for the couples who have a gap in income between them or for those who are likely to have one of them quit their jobs after a few years.