You’ve met that special someone and have decided to take the next step. (Congrats!) For homeowners, cementing these partnerships is a chance to turn a house into a home as the person you love most in the world joins you. For some couples, though, there are a few questions to ponder before tying the knot.
Whose house to live in?
One of you may live in an adorable downtown apartment while the other may have a great house in the suburbs. Choosing where to live depends on how the two of you answer a few different questions about your future. Do you plan to stay in this area? Are you aiming to have a family? If yes, how will that impact your choice of home? Do you want to stay mobile for one person’s career or both careers? The same questions and many more apply in this situation as they do for anyone who is deciding whether or not they are ready to purchase a home. Columbus, Ohio is a great city to live in for so many reasons, but it is also important to make a good choice about where you ultimately land.
To Add or Not Add a Spouse to a Mortgage or Deed
If you and your partner decide to move into one home, it is a good idea to weigh the pros and cons of getting a mortgage together. These are things to discuss and carefully consider as you move forward.
Reasons to Not Add a Partner to a Mortgage
You’re buying a house with pre-marriage money. If you are purchasing a home using money you inherited or earned before getting married, it might be a good idea to leave your spouse off the mortgage, deed, and title. This leaves the property solely in your name to be sold or mortgaged at your discretion.
You might get a better deal from a lender. If your partner has a low credit score, it might be to your advantage to keep that person off the mortgage. When two people apply for a loan, the lender uses the lower of the two scores. This will result in a higher mortgage rate, which will not be to your advantage. It also might be easier to get a mortgage or refinance an existing one without your partner.
You can will the property to whomever you wish. If you are the sole the owner of a property, you can decide who to leave it to at the time of your death. This might be a particular point of consideration for those entering into second marriages or partnerships later in life.
You want to keep the property away from creditors. If your partner defaulted on a loan previously or perhaps had to declare bankruptcy for one reason or another, having the home in one person’s name is a way to keep it out of the hands of creditors.
Your relationship may not work out. While it is my sincerest hope that you are in the happiest of unions, it is also possible that down the road things may not be so perfect. Keeping property separate is a way to protect it from possible division during divorce.
Reasons to Add a Partner
You want to build assets as a couple. Those just starting out are looking to build toward a stable financial future together, and having a mortgage and deed in both names is a good way to do just that. Together, you will be building a financial record that will prove an asset in its own right in the future.
You want to work as a team. Most people enter into a relationship with the idea that everything from this point forward will be shared and that includes finances large and small. This is, perhaps, the biggest reason many couples decide, for better or worse, to put both names on a mortgage and deed. It is not without its challenges, but it can also be viewed as another part of building a lifelong partnership.
You both want to be able to communicate with the homeowner association or condominium board. Some associations will only work with the person whose name is on the deed. All communication will only go through one of you, which could turn out to be difficult or simply annoying. Your partner will certainly have their own opinions about where they live, and you may want either of you to be able to represent the interests of your household.
How to Add a Spouse or Partner to a Deed
The most common way to add another person to a deed is a quitclaim deed. A quitclaim deed is a popular choice because it is relatively easy and inexpensive. The forms can be picked up at office supply stores or anywhere legal forms are sold. Everyone on the deed must sign in front of a notary public to add the new person, and then the form must be filed with the county clerk of the county where the property is located.
While it is possible to do this transaction without a real estate attorney, I advise you to check with one for two reasons. A quitclaim deed may be fine in most instances, but a real estate attorney can help determine if there is a better route for you and your partner to take.
A second reason to consult with a real estate attorney is if you and your partner are considering putting both names on the deed but not the mortgage. The two of you may decide this is the way to go for one of the reasons mentioned above – creditor issues or poor credit ratings – however, it may result in complications in the future. For example, if one of you dies, the other one may find themselves forced to pay the mortgage in full or sell the property. Again, talking this over with a real estate attorney will help you and your partner make the best decision for your future.
How to Add a Spouse or Partner to a Mortgage
If you and your partner decide to go in together on a mortgage on a property that one of you already owns, the process is a bit more complicated. More likely than not, the mortgage will have to be refinanced. Most lenders will see this as a significant change in the status of the contract and will want to vet the new person.
Call your mortgage company to let them know that you want to add someone to the mortgage. In the rare case that they simply let you add the new person’s name, go for it. However, if they suggest refinancing, have your list of questions at the ready. Ask about rates, fees, and documentation requirements. Don’t agree just yet to go with them.
Check your partner’s credit score. As mentioned above, if their credit score is bad, it could raise your rate. Get a copy of their credit report and review it. Well-informed is well-prepared.
Shop for mortgages. This is a bit like the early days when you were first shopping for a lender. Put those same sleuthing skills to work as you talk to local lenders and ask family and friends for recommendations.
Ask what documents you and your spouse will need and make a checklist. You will both need to report assets and income, so collect pay stubs, bank and brokerage statements, loan information, and tax returns. Be sure to make and keep photocopies of everything as you will be turning it all over to the lender with your application.
Apply for the loan and double check everything at closing. Make sure before closing that all of the details are there as they were explained to you. Don’t be shy about asking questions about fees, points, length of loan and payments before you and your partner sign. It’s one of your first big steps together, so take your time and set yourselves up for success.
Photo by State Farm