When you sign a mortgage, there are implications beyond simply putting your John Hancock on the paperwork. How you sign the papers and with whom you sign them have far-reaching implications. This decision determines who signs documents regarding the property. More importantly, the way the mortgage is signed determines how the property is transferred if one of the owners dies. Joint tenancy with the right of survivorship speaks to these issues.
Joint tenancy gives equal shares of ownership to two or more people who purchase a property. Each tenant has equal interest in the entire property and equal responsibilities. The main benefit of joint tenancy is that if one owner dies, that person's ownership interest is passed on to the other owner or owners as a matter of law. No will is necessary. In the case of multiple owners, if one owner dies that ownership share is divided equally between the surviving owners. If a second owner dies, his ownership share is divided equally among the surviving owners. This pattern repeats until the last living tenant becomes the sole owner.
Joint Tenancy Downside
Should one of the tenants want her name off the mortgage, this can only be accomplished by refinancing. You cannot simply have your name taken off the mortgage. The party who keeps the house must refinance it in his name only. This circumstance usually surfaces when a married couple divorces, or when an unmarried couple buys a home and the relationship sours. But until the home is refinanced, which is an expensive proposition, both tenants are equally responsible for mortgage, tax and insurance payments.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states. When the purchase of property is made in one of these states and the deed says the owners are married, the law assumes it is held as community property. In some ways it is similar to joint tenancy, as both owners have equal rights. The transfer of ownership, however, is not automatic. Both need to sign an agreement in order for this transfer to take place.
Tenants in Common
A property owned by two people who are not joint tenants or community property owners is called being tenants in common or co-owners. Ownership shares of the property do not have to be equal. Each tenant can pass on her interest through a will or sell it to another party. The ramifications are obvious. One of the co-owners could end up owning the home, or sharing it, with a complete stranger.
One individual holds title to the property in question. There is an exception, however. A married couple may put the title in the name of one spouse only. In this case, the deed would note that the spouse is the sole owner.