What if only your spouse is on the mortgage or title?
Is there anything more romantic than purchasing a home together? Maybe there is, but certainly a goal of many couples is to buy a home together. For any number of reasons, only one of you may end up on the mortgage, or on the title, for that matter. If that’s the case for you, what do you need to know?
I asked Keith A. Schuman, a real estate attorney in New York City and an expert in residential law at Schuman and Associates, to break down for us what it means if you aren’t on the mortgage or on the deed to the property. Keith is a graduate of the University of Pennsylvania (B.A., summa cum laude) and Cornell University Law School (J.D.) and has extensive experience in transactional real estate work. He has represented developers, owners, operators, purchasers and sellers of commercial and residential properties throughout the United States. He has also represented landlords and tenants in commercial lease transactions, borrowers and lending institutions in commercial and residential re-financings, boards of cooperative buildings, and sponsors in the development of residential cooperatives.
If only your spouse is on the mortgage, can you be added later?
If only your spouse’s name is on the mortgage, you may be able to add your own name to the mortgage. To do so, you would need to contact your lender to make the request. Your lender will either decline to add your name, due perhaps to credit concerns, or agree to add your name by means of a simple mortgage modification.
The other method of adding your name to an existing mortgage is through a refinance. A refinance is where you get an entirely new loan for your home, and you would apply for the loan as a couple.
If only your spouse is on the mortgage, are you automatically on the title?
First, by way of definition, a mortgage is a security interest given to a lender as collateral for a loan, whereas title evidences one’s ownership of a property by means of an instrument called a Deed. You cannot give a mortgage unless you are on the title. So, if only your spouse is on a mortgage, you are not necessarily on the title, automatically or otherwise. You may, however, be on the title, but not on the loan as you’ll see below.
If only your spouse is on the title, how can you be added?
If you are not on the title and would like to be, it’s a simple process to be added. The title holder would execute a new deed to transfer his or her interest in the property to both him/herself and to you. An attorney would prepare the deed and necessary transfer tax forms for a cost of approximately $750, plus another $400 or so for filing the deed and for the real property transfer taxes filing.
What happens if only your spouse is on the mortgage, and they die?
Most mortgages contain an “acceleration clause” which provides that if the mortgage holder dies, the mortgage immediately comes due, meaning that the lender can call the loan, and the loan must be paid off immediately. But because of the Garn-St. Germain Depository Institutions Act of 1982, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the remaining spouse may be added to the mortgage, and the bank can’t call the loan as due, regardless of the surviving spouse’s ability to repay the loan. The law applies to spouses as well as to anyone who inherits the property from the deceased mortgage holder.
If you are not on the mortgage, can you refinance?
In short, no. Only the spouse that is on the mortgage may refinance the mortgage.
What are the risks to a spouse who is not on the mortgage or the title?
If you are not on the mortgage, your spouse who is on the mortgage can borrow against the equity in your home without your consent or knowledge.
If you are not on the title, your spouse who is on the title can sell the property without your consent.
The spouse who is on the title can bequeath the property to someone other than their spouse in the event of his or her death. He or she could, for example, leave the home to their children instead of to you.
What are the benefits to a spouse who is not on a lease or title?
A lender will consider the combined credit scores of both spouses (or use the lower credit score) applying for a loan. If one spouse has good credit and the other has poor credit, or one spouse doesn’t meet the lender’s income requirements, they may not qualify for a loan, or only qualify for a loan with a less favorable interest rate. Accordingly, in those instances where only one spouse has good credit and income, some couples will apply for a loan only in the name of the more qualified spouse. In those instances, the benefit to the spouse not on the mortgage is that your household costs will be lower.
Another option is for you and your spouse to purchase the home together (with both spouses on the deed), but with only one spouse signing the mortgage note (the equivalent of an IOU). In those instances, both spouses are owners, and both will sign the mortgage documents, but only the spouse signing the mortgage note is obligated for repayment of the debt.
Also, if you have trouble paying your mortgage and miss payments, only the spouse who is on the mortgage note will have their credit affected.
Another benefit to a spouse who is not on the title is that they may not have liability if someone is hurt on the property (although most accidents are covered by the homeowner’s insurance). If someone is hurt, however, they can only sue the homeowner.
What are the state by state differences that affect spouses who are not on the title?
There are two different kinds of state laws which determine differences for spouses not on the title. Some states use a “common law” system of property ownership. For example, in New York, if your name is on the deed, you are an owner of the property and you are free to leave your ownership interest in the property to whomever you choose. On the other hand, in community property states (which include California and 11 other States), money earned by either spouse during marriage and all property bought with those earnings (including a home) are considered community property and deemed to be owned equally by the couple. Generally this applies no matter whose name is on the deed. Likewise, debts of either spouse incurred during marriage are generally considered debts of the couple.
(Related article: What does it mean to be a Guarantor? This article discusses the ownership rights (or, lack there of) of Guarantors of a loan vs. Co-Signers of a property)