Can I get financing for a co-owned property?

Financing is one of the biggest steps in any home purchase, and it can seem especially complex when you’re buying with others. The good news is that co-owners have several well-established options for securing a loan. At Joynt, we help co-owners navigate this process by providing the legal and operational framework that gives both you and your lenders confidence.

Let’s break down the most common financing methods for a co-owned property.

The 3 Most Common Financing Methods

1. The Group Mortgage (Conventional Residential Loan)

This is often the most straightforward path. In this model, all co-owners apply for a single mortgage together from a conventional lender (like a bank or credit union). The lender evaluates everyone’s combined financial picture—credit scores, income, and debt—to approve one loan for the entire property.

• How it works: All owners are named on the loan and, initially, on the property title. You benefit from standard residential interest rates, which are typically lower than other loan types.
• Pros:
  • Favorable Rates: Access to the most competitive interest rates on the market.
  • Lender Availability: Most residential mortgage lenders can process this type of application.
  • Simpler Process: The application process is familiar to most lenders and real estate professionals.
• Cons:
  • Joint and Several Liability: This is the biggest drawback. If one owner fails to pay their share, everyone is legally responsible for the full mortgage payment. A default by one impacts everyone’s credit score.
  • Credit Limitations: The group’s application is often only as strong as its weakest financial profile. One owner’s low credit score or high debt-to-income ratio can jeopardize the loan for everyone or result in a higher interest rate.
  • Inflexible Exits: Selling an individual share is difficult. To remove a person from the loan, the entire mortgage must typically be refinanced, which requires all remaining owners to re-qualify.
• Key Considerations: 
  • A rock-solid co-ownership agreement is absolutely essential to outline responsibilities for payments, defaults, and exit strategies.  Joynt can help!
  • Because all owners are intertwined financially, this option is generally best for groups with high levels of trust and similar financial stability, such as family members.
  • The Joynt Model: At Joynt, we require the property to be held in a LLC. If you use a group residential mortgage, you will close with the individuals on the title. You must then get the lender’s permission to transfer the title to your LLC. Some lenders allow this, others do not, so it's critical to confirm this with your lender beforehand.

How Joynt Helps: Joynt’s framework is designed to mitigate the risks of a group mortgage.

• LLC Titling: After closing, Joynt requires that the property title be transferred to a LLC we create for you. This separates direct individual ownership from the property itself, making it easier to manage and transfer shares.
• Clear Exit Process: Our Co-ownership Agreement clearly defines the process for selling a share, providing a predictable path for owners who need to exit the investment.
• Financial Safeguards: We require all co-owners to fund and maintain a shared cash reserve. This buffer covers mortgage payments (as well as any other expenses) if one owner is temporarily unable to pay, protecting everyone’s credit and preventing default.
• Default Management: Joynt’s operating agreement includes a reliable process for removing a defaulting owner and recovering the funds owed, providing a crucial safety net for the remaining partners.

2. The Commercial Loan (to a LLC)

In this structure, the property is purchased directly by a Limited Liability Company (LLC) that Joynt creates for the sole purpose of owning the home. The commercial loan is issued to the LLC itself, not to the individuals. The co-owners (members of the LLC) then act as personal guarantors for the loan.

• How it works: You establish an LLC with Joynt first. The LLC applies for a commercial loan, and the lender assesses both the property and the financial strength of the individual guarantors.
• Pros:
  • Cleaner Liability: Liability is more contained. While you are personal guarantors, a default is primarily against the LLC, offering a degree of separation from your personal credit.
  • Flexible Ownership: Selling a share is much simpler. You are selling a membership interest in the LLC, not a piece of real estate. This transaction doesn't typically require refinancing the entire loan.
  • Professional Structure: Lenders often view this as a more stable and professional arrangement, as it requires a formal operating agreement.
• Cons:
  • Higher Costs: Commercial loans usually come with higher interest rates and origination fees than residential mortgages.
  • Fewer Lenders: Not all banks offer commercial loans for residential properties, so your options may be more limited.
  • Complex Application: The application process is more rigorous and may require business plans and detailed financial projections for the LLC.
• Key Considerations: 
  • Understand the terms of the personal guarantee. While it separates the loan from your credit report in the same way, you are still financially responsible if the LLC defaults.
  • This is the preferred structure for co-owners who may not be related or want a formal, flexible arrangement that protects all parties and simplifies future ownership changes.

How Joynt Helps: This model aligns perfectly with Joynt's core structure.

• Built for LLCs: Joynt’s entire platform is built around LLC ownership. We create the legal entity and provide the robust, attorney-vetted operating agreement that commercial lenders want to see.
• Increased Lender Confidence: By requiring a cash reserve and outlining clear rules for capital reserves and default resolution, Joynt makes your LLC a much more attractive and lower-risk borrower in the eyes of a commercial lender.

3. Seller Financing

Sometimes, you can bypass the bank entirely. In a seller financing arrangement, the seller of the property (or a share of the property) acts as the lender. The buyer and seller agree on a purchase price, down payment, interest rate, and repayment schedule. This agreement is formalized in a legal document called a promissory note.

• How it works: This is common when one co-owner sells their share to a new buyer. Instead of the new buyer getting a bank loan, they make monthly payments directly to the selling owner.
• Pros:
  • Flexibility: Terms are completely negotiable between the buyer and seller. This can help buyers who may not qualify for a traditional mortgage.
  • Speed and Simplicity: You can avoid the lengthy underwriting process of a traditional bank, leading to a faster closing.
  • Open to More Buyers: A seller can sell their share to a wider pool of potential buyers by offering financing.
• Cons:
  • Higher Interest Rates: Sellers often charge a higher interest rate than banks to compensate for the risk they are taking on.
  • Unfavorable Terms: The arrangement may include a short loan term with a large "balloon" payment due at the end.
  • Risk to Buyer: The buyer must ensure the seller owns the property/share free and clear. If the seller has their own underlying mortgage, the arrangement becomes more complex and risky.
• Key Considerations:
  • Legal Review is a Must: Both buyer and seller must have separate attorneys review all documents, including the promissory note and deed of trust, to ensure their interests are protected.
  • This option is particularly well-suited for buying or selling individual shares within an existing co-ownership group, as it avoids the complexity of refinancing the entire property's primary mortgage.

How Joynt Helps: Joynt’s framework adds critical layers of security and professionalism to seller-financed deals.

• A Structured Environment: The transaction occurs within the established Joynt LLC. The new owner is buying a share of the LLC, which is a much less cumbersome process.
• Protecting All Parties: Joynt's custom operating agreement governs all owners, ensuring the new, seller-financed owner abides by the same rules, including contributions to the cash reserve and maintenance funds. This protects the original co-owners and the seller, who remains invested until the note is paid.

At-a-Glance Comparison

Other Financing Options & Key Concepts

• Pay Cash: The simplest option. If your group has the capital, paying cash eliminates interest and the complexities of working with a lender.
• Personal Loan: An unsecured loan from a bank. These typically have much higher interest rates and lower borrowing limits, making them unsuitable for buying an entire property but potentially viable for purchasing a small share.
• Crypto-Backed Loans: An emerging option where you use cryptocurrency as collateral for a loan. Companies like Milo.io specialize in this. It’s a niche market with its own unique risks tied to the volatility of crypto assets.
• A Note on Tenancy in Common (TIC) Financing: You may have heard of TIC loans, where each co-owner gets a separate loan for their individual percentage share of the property. It's crucial to understand the difference between two structures:
  • TIC for Multi-Unit Buildings: This is where TIC loans are most common. In a condo building or duplex, each TIC owner has an exclusive right to use a specific unit. Lenders are more comfortable with this because they can foreclose on a single, defined living space if one owner defaults.
  • Fractional for Shared Homes: For a single-family vacation home or primary residence where all spaces are shared (like the properties managed with Joynt), TIC loans are very rare. Lenders are hesitant because if one owner defaults, there is no distinct, separable asset to foreclose on, making it a much riskier proposition for the bank.

Ultimately, the right financing path depends on your group’s financial situation, long-term goals, and risk tolerance. By using a platform like Joynt, you create the stable, transparent, and legally sound foundation needed to make any of these options work successfully.