Newly Wedded? Adding Your Spouse To Your Existing Home Loan
If you get married after you take out a mortgage loan on your own to buy a house, it is possible to add your spouse to the loan. But since you will be changing the terms of the loan, there are factors you'll want to consider that can affect whether you get approved for the loan and how much it will cost if you do.
Credit Scores/Debt-to-Income Ratios
Refinancing your current home mortgage allows you to pay off the balance on the existing loan and then take out a new home loan together with your spouse. You'll get a new term and maybe a new interest rate.
The lender will check both your credit reports when you apply; therefore, make certain that your new spouse has a healthy credit score before taking the refinance route. If both you and your spouse have a high credit score, you may even qualify for a better mortgage rate than you did alone.
On the other hand, if your new spouse has a lower credit score than you do, lenders use the lower of the two credit scores when deciding whether to give you a loan. If that's the case, the lender may qualify you for a loan together but at a higher interest rate. Paying a higher rate not only means that you will have a higher monthly mortgage payment since you'll be paying more in interest, but you'll pay more total interest over the life of the loan.
Also, depending on the debt obligations your new spouse owes, you may not qualify to refinance your mortgage loan if his or her debt-to-income ratio is too high. Since lenders generally want a mortgage payment to equal no more than 36 percent of your combined gross monthly income, you may be in trouble if your spouse is saddled with high credit card debt, multiple student loans, and an auto loan that still has a few years left before being paid off.
Garn-St. Germain Depository Institutions Act
Even if you don't add your spouse to your mortgage loan, his or her interest in the home is protected under the Garn-St. Germain Depository Institutions Act of 1982. By law, if you – the sole borrower – die and your spouse inherits the home, the lender can't call the loan and must allow him or her to take over the mortgage payments. A title transfer due to the borrower's death is an exception where a mortgage lender can't make the surviving spouse who inherits the home to pay off the existing mortgage loan, regardless if the original mortgage loan included a due-on-sale clause.