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We are refinancing our home mortgage, and we can qualify based on only one of our incomes alone. We are now considering whether it is more beneficial to refi in just one person's name instead of both.

Background info:
Married couple owning a house jointly (both names on the deed).
Both have credit scores well within the "excellent range".
Both have multiple credit cards with >10 years history.
non-mortgage credit utilization < 10% for either person.

The advantage I can think of is,
The person who does not have a mortgage may qualify for a lower rate loan more easily if we decide to purchase a second house (or move house before we can sell this one), because on the credit report there isn't a mortgage already. -- Am I right on this?

The disadvantage I can think of is,
The person who does not have a mortgage may have a not-so-ideal credit "composition" due to the lacking of a mortgage, therefore, resulting in a lower credit score. -- Will this be a large impact on the credit score, based on our credit situation? If so, this may negate the above mentioned advantage.

I appreciate any comment or suggestions.

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FWFFan (Oct. 08, 2010 @ 1:50p) |

I have a friend who's first spouse passed away. His name was the only one on the mortgage. Now, the widow has remarried.... (more)

KingCheap (Oct. 08, 2010 @ 2:11p) |

My understanding was that the main *disadvantage* of having only one spouse on the mortgage was in the case of if the sp... (more)

inixsys (Oct. 08, 2010 @ 5:59p) |

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If you're going to go with only one spouse on the mortgage they have to qualify for it with just their income. Many two income households can't qualify with just one spouse's income.

The main advantage I can think of is that in a SHTF scenario (dual job loss or something else unexpected) if you had to dump the house, (ie, foreclosure / short sale), you're only going to trash one person's credit.

Mine was a VA loan,
It seemed easier to keep the wife off off the paperwork.

We have only me on the mortgage (but made sure my wife is on the deed). BoA just used my income, not HHI for loan approval and underwriting. We did this, not because of only one person's credit being trashed in the event of a foreclosure, short sale, etc), but rather to halp maximize my wife's credit score and to keep her credit report free of debt.

If any future credit opportunities come up (many of which could use household income, but only look at one person's credit report and score), we (she) will be in good position to take advantage of them. Perhaps AORs will eventually return, for example. Hey, anything's possible.

glxpass said: We did this, .... to halp maximize my wife's credit score and to keep her credit report free of debt.

Thanks, your case is almost the same as mine then. But in this thread though, it is mentioned that, in order to get high credit scores, "the best accounts are a single home mortgage, and one or more major UNSECURED bank cards" , which seems to imply that not having a mortgage on your wife's credit report may actually reduce her score. In your experience, is that the case? Is your wife's score in the "excellent range" without the mortgage?


If any future credit opportunities come up (many of which could use household income, but only look at one person's credit report and score), we (she) will be in good position to take advantage of them. Perhaps AORs will eventually return, for example. Hey, anything's possible.

We wouldn't want to miss such opportunities either

I have no idea whether asset protection is an issue in your situation. If it is, this is often the primary reason for keeping the house in the name of only one of the spouses. If, for instance, one of the spouses stays at home or is in a very low risk occupation while the other one has much more substantial exposure to lawsuits above liability insurance limits, keeping the ownership of the assets in the name of the low liability risk spouse is one of the most effective and least expensive asset protection techniques that you can employ.

As for your credit profile question, everything that I've seen out there has always said that having a mortgage helps your credit profile quite a bit. Keep in mind, however, that while it may help your credit profile, it will also increase the debt that's showing up under your name. Hence, having a mortgage on your profile, while improving your credit score, will also cause your DTI (debt to income) ratio to be higher, which may disqualify you from future credit opportunities. Hence, it really depends on your specific situation. If, for instance, your overall DTI will remain under something like 20% with the mortgage payment factored in, I would put the mortgage under both spouses' names, as your DTI levels won't disqualify you from anything and having a mortgage on the credit report will help. If, however, the DTI is in the upper 30's, I'd keep one of the spouses off the mortgage (assuming, of course, that you can get a mortgage without factoring in that spouse's income).

On the same line of thinking, would one spouse be in a more difficult situation should there be a divorce? It may work out in the end, but getting there may be a bumpy road as the the mortgage is on one name but the deed would be in both.

isobro said: On the same line of thinking, would one spouse be in a more difficult situation should there be a divorce? It may work out in the end, but getting there may be a bumpy road as the the mortgage is on one name but the deed would be in both.It may or may not. Your question is certainly appropriate but there are just way too many considerations and variables that need to be considered in formulating an answer, which will vary state to state and individual to individual anyway.

geo123 said: I have no idea whether asset protection is an issue in your situation. If it is, this is often the primary reason for keeping the house in the name of only one of the spouses. If, for instance, one of the spouses stays at home or is in a very low risk occupation while the other one has much more substantial exposure to lawsuits above liability insurance limits, keeping the ownership of the assets in the name of the low liability risk spouses is one of the most effective and least expensive asset protection techniques that you can employ.

Thanks. That's an angle we have not considered. Our house is jointly owned. So if the spouse with higher income owns 1/2 of the property but assumes all the debt that would reduce this spouse's exposure right?

geo123 said: As for your credit profile question, everything that I've seen out there has always said that having a mortgage helps your credit profile quite a bit. Keep in mind, however, that while it may help your credit profile, it will also increase the debt that's showing up under your name. Hence, having a mortgage on your profile, while improving your credit score, will also cause your DTI (debt to income) ratio to be higher, which may disqualify you from future credit opportunities. Hence, it really depends on your specific situation. If, for instance, your overall DTI will remain under something like 20% with the mortgage payment factored in, I would put the mortgage under both spouses' names, as your DTI levels won't disqualify you from anything and having a mortgage on the credit report will help. If, however, the DTI is in the upper 30's, I'd like one of the spouses off the mortgage (assuming, of course, that you can get a mortgage without factoring in that spouse's income).

Thanks. With "overall DTI" do you mean based on HHI or that individual's income? Our case is, individual DTI is either <20%, or > 30%, depending on which one of us you are talking about. Did I understand you correctly that in this case we should only put the <20% name on the mortgage?

Regarding credit score -- I have played with some "credit score simulators" online, and they seem to only ask about non-mortgage debts, and don't ask a question like "do you have a mortgage". The closest it gets is "how long ago did you have your first loan", which in our case, will be a day back in history no matter what we do in the refi. The results from those simulators, show that our scores are in the "excellent range" (which BTW matches the reality). Maybe they automatically assume we have a mortgage? I wish they would make "do you have a mortgage" one of the variables.

isobro said: On the same line of thinking, would one spouse be in a more difficult situation should there be a divorce? It may work out in the end, but getting there may be a bumpy road as the the mortgage is on one name but the deed would be in both.

My simple understanding would be, at the divorce, if the person who has the loan wants to keep the house, then (s)he won't be forced into a refi just so that the other name can be removed. Of course, the reality is more complicated than that.

zry said: geo123 said: I have no idea whether asset protection is an issue in your situation. If it is, this is often the primary reason for keeping the house in the name of only one of the spouses. If, for instance, one of the spouses stays at home or is in a very low risk occupation while the other one has much more substantial exposure to lawsuits above liability insurance limits, keeping the ownership of the assets in the name of the low liability risk spouses is one of the most effective and least expensive asset protection techniques that you can employ.

Thanks. That's an angle we have not considered. Our house is jointly owned. So if the spouse with higher income owns 1/2 of the property but assumes all the debt that would reduce this spouse's exposure right?
Correct. It's even better if the spouse with the greatest exposure to liability has all the debt in his/her name and very few, if any, assets. Say your house is worth $200K and you have a $100K mortgage on it. If the house is jointly owned, then judgment creditors of either of the spouses can get to the $100K in equity. On the other hand, if you have greater exposure to lawsuits than does your wife and she is the sole owner of the house, then your judgment creditors cannot get to the equity at all because you don't own it.

Thanks. With "overall DTI" do you mean based on HHI or that individual's income? Our case is, individual DTI is either <20%, or > 30%, depending on which one of us you are talking about. Did I understand you correctly that in this case we should only put the <20% name on the mortgage?I would definitely keep the <20% DTI person on the mortgage, as having a mortgage on the credit profile is likely to help and the DTI is going to be low enough, so that it won't prevent that person from qualifying for the best offers in the future.

The >30% DTI person is a more difficult decision. If that person's credit profile can benefit from having a mortgage there, I'd add him/her to the note. If, however, that person's credit profile is already exceedingly strong, then there isn't much benefit in adding him/her to the note. Hence, I'd be inclined to keep that person off the note to make it easier for that person to qualify for future financial deals.

geo123 said: If, however, that person's credit profile is already exceedingly strong, then there isn't much benefit in adding him/her to the note. Hence, I'd be inclined to keep that person off the note to make it easier for that person to qualify for future financial deals.

Thanks. It's hard to be certain whether our credit profile is already exceedingly strong without the mortgage, as our current mortgage is already in both names. And I can't find simulators that give me the "what if I pay off the mortgage" scenario. It seems that the only way to find out is to not be on the new mortgage, and see what happens to the credit score.

Maybe I should ask this question - if later we find out that not being on a mortgage actually reduces the second credit score, what are the chances of the lender willing to add a name to the mortgage (without another refi)? If that's possible without too much hassle, maybe we've got a solution.

zry said: Thanks. It's hard to be certain whether our credit profile is already exceedingly strong without the mortgage, as our current mortgage is already in both names.If your current mortgage is already in both names, it will continue to stay and show up there (obviously as a "paid off" item) for the next 10 years. Based on the limited information you've posted so far, this would cause me to seriously consider keeping the >30% DTI person off the new mortgage.

This obviously ignores other potential considerations, such as the asset protection ones that I mentioned above.

Maybe I should ask this question - if later we find out that not being on a mortgage actually reduces the second credit score, what are the chances of the lender willing to add a name to the mortgage (without another refi)? If that's possible without too much hassle, maybe we've got a solution.It's INCREDIBLY easy to do so but, unfortunately, residential mortgage lenders don't know how to do it, so your chances would be slim to none. If you had a commercial loan, this would be done in 15 minutes.

For a lightening second I thought OP wants to lead a polygamous lifestyle.

The advantages and disadvantages of having only one spouse

geo123 said: If your current mortgage is already in both names, it will continue to stay and show up there (obviously as a "paid off" item) for the next 10 years. Based on the limited information you've posted so far, this would cause me to seriously consider keeping the >30% DTI person off the new mortgage.

Thanks. I didn't know that a paid mortgage can also improve credit. In that case, the importance of this new mortgage doesn't seem as much as I originally thought.

geo123 said: This obviously ignores other potential considerations, such as the asset protection ones that I mentioned above.

With joint house ownership this does seem to protect at least 1/2 of the house value still. That's good enough for us now. At present don't want to go out of the way to change the deed, as it is a separate issue from the mortgage.

geo123 said: It's INCREDIBLY easy to do so but, unfortunately, residential mortgage lenders don't know how to do it, so your chances would be slim to none. If you had a commercial loan, this would be done in 15 minutes.

Ah, we never get it easy do we

mnsweeps said: For a lightening second I thought OP wants to lead a polygamous lifestyle.

The advantages and disadvantages of having only one spouse


In the dreams maybe But no thanks, one is enough...

zry said: glxpass said: We did this, .... to halp maximize my wife's credit score and to keep her credit report free of debt.

Thanks, your case is almost the same as mine then. But in this thread though, it is mentioned that, in order to get high credit scores, "the best accounts are a single home mortgage, and one or more major UNSECURED bank cards" , which seems to imply that not having a mortgage on your wife's credit report may actually reduce her score. In your experience, is that the case? Is your wife's score in the "excellent range" without the mortgage?


If any future credit opportunities come up (many of which could use household income, but only look at one person's credit report and score), we (she) will be in good position to take advantage of them. Perhaps AORs will eventually return, for example. Hey, anything's possible.

We wouldn't want to miss such opportunities either

I should have stated that my wife has been on our previous mortgage loans (as well as me), just not on our latest re-fi. So my wife's credit reports show having had multiple paid-off mortgage loans. It sounds like this would also apply to you, if you and your wife were joint borrowers, and then only you were on the latest re-fi.

I'm not an expert, but having a paid-off mortgage on one's credit reports with no current mortgage obligation seems much better credit-wise than having a mortgage that's still being paid for on one's credit reports.

zry said: With joint house ownership this does seem to protect at least 1/2 of the house value still.Just to clarify, as far as creditors are concerned, it doesn't matter whether your ownership of the house is joint or whether you are its sole owner. Either way, they can get 100% of the equity.

In other words, let's say that the house has $100K in equity and $0 mortgage. You have $100K in loans (your wife is not a co-borrower with you) and your wife has $0. If you own the house jointly, your creditors have access to your entire $100K equity stake, rather than $50K. At least this is the way it would work in most states. This is because with joint ownership, each joint owner is deemed to own 100% of the asset.

We have refinanced with only one spouse on the mortgage--a very similar scenario. We carry no debt at all except the house and both have superb credit (800+). The lack of mortgage has not had an adverse effect on the spouse's credit score.

It won't apply to many, but if one spouse is unavailable or unwilling to sign papers, it can complicate many things.

I know of case where the wife had mental problems and would not sign anything. Problems included:

1. qualifying for a post Katrina
aid to rebuild because her name was on the house.

2 Getting a 2 5/8 mortgage those who know mortgages know that especially in 2006, this was a very good deal)for rebuilding and to refinance the damaged house from the SBA. The deal was approved by the SBA, but since her signature was needed on the papers it never got done.

3. Selling the house (what was left of it) could not be done in one way (thy most advantageous) because it involved an escrow (and the paranoid partner did not trust a promise of the escrow holder to actually do what was promised.

4. Qualifying for retirement health insurance (covering the wife and 3 minor children)appeared to depend on actually being retired, which was to be evidenced by taking money out of retirement accounts (although signing a statement that this would be done served initially, there was fear that someone would check and discover it had not happened). Since she was unwilling to sign the papers, this was not done for a long time.

Admittedly, there are ways for getting someone declared mentally incompetent so necessary actions can be done, but they are expensive and are especially so when one is out of the state where the real estate is.

Less critically, if one is traveling or too sick to sign papers, not needing two signatures can be convenient.

geo123 said: zry said: With joint house ownership this does seem to protect at least 1/2 of the house value still.Just to clarify, as far as creditors are concerned, it doesn't matter whether your ownership of the house is joint or whether you are its sole owner. Either way, they can get 100% of the equity.

In other words, let's say that the house has $100K in equity and $0 mortgage. You have $100K in loans (your wife is not a co-borrower with you) and your wife has $0. If you own the house jointly, your creditors have access to your entire $100K equity stake, rather than $50K. At least this is the way it would work in most states. This is because with joint ownership, each joint owner is deemed to own 100% of the asset.


Thanks for that explanation. Definitely something for us to think further about.

computerquest said: We have refinanced with only one spouse on the mortgage--a very similar scenario. We carry no debt at all except the house and both have superb credit (800+). The lack of mortgage has not had an adverse effect on the spouse's credit score.

Thanks for this info. That's reassuring.

pennypicker said: The main advantage I can think of is that in a SHTF scenario (dual job loss or something else unexpected) if you had to dump the house, (ie, foreclosure / short sale), you're only going to trash one person's credit.

This is the main advantage. A friend of mine with a $1.1mil mortgage got almost $300K knocked off his mortgage solely due to the fact that it was just his wife on the note. She is now a stay at home mom and they could afford the lates on her credit report. His credit report needed to be high to maintain the various lines of credit for his business.

ProfessorEd said: It won't apply to many, but if one spouse is unavailable or unwilling to sign papers, it can complicate many things.
...
Less critically, if one is traveling or too sick to sign papers, not needing two signatures can be convenient.


Good info. Thanks. Luckily things like this have not affected us (hopefully never will In our case, I think even if only one signature is needed, we would probably both be there anyway, as it (the house) is so far the biggest thing in our life financially, and it would feel weird to be absent.

UtahDealSeeker said: pennypicker said: The main advantage I can think of is that in a SHTF scenario (dual job loss or something else unexpected) if you had to dump the house, (ie, foreclosure / short sale), you're only going to trash one person's credit.

This is the main advantage. A friend of mine with a $1.1mil mortgage got almost $300K knocked off his mortgage solely due to the fact that it was just his wife on the note. She is now a stay at home mom and they could afford the lates on her credit report. His credit report needed to be high to maintain the various lines of credit for his business.


Wow!

We have too many people thinking the credit scire is an SAT and that a mortgage will give them some essential boost- quit thinking this way.

The answer is simple. If one person qualifies for the loan, DO NOT add more people to it . Period. All this Is is COSIGNING. We all know cosigning is terrible when it comes to friends and family but some people think the answer changes if you're married . It doesn't

A wise old bird in this forum once said: Cosigning is the financial equivalent of sharing needles. Doesn't matter if the needle is with your spouse

<Totally off-base rant.>

In the words of Emily Latella: "Never mind."

I think I was clear that if two people arent needed to qualify, don't cosign. No matter if ts a spouse or anyone else.

If two ppl are needed to qualify, such as in the situations you mentioned, that's a different story.

SUCKISSTAPLES said: I think I was clear that if two people arent needed to qualify, don't cosign. No matter if ts a spouse or anyone else.
Only to someone with a modicum of reading comprehension skills. Sigh. Sorry about that!

zry said: computerquest said: We have refinanced with only one spouse on the mortgage--a very similar scenario. We carry no debt at all except the house and both have superb credit (800+). The lack of mortgage has not had an adverse effect on the spouse's credit score.

Thanks for this info. That's reassuring.


Just anther data point. Both my wife and I have have 800+ scores.
Only 1 of us is on the mortgage.

1 year ago, both of our middle scores were ~785.

.

I have a friend who's first spouse passed away. His name was the only one on the mortgage. Now, the widow has remarried. They can't afford the mortgage since the lender ripped her off by taking advantage of her when she was in crisis over the death of her husband. She had no income so they said they'd 'help' her and lowered her payment a small amount each month. But, they never told her that none of her payments would go toward principal. So, $50,000 dollars later (all payments toward interest over 3 years), she finally finds out after she remarried (she never took care of finances, only her husband who died). I sent them to an attorney. Basically, the lender is up a creek on this one. They really should lower the principle owed on the house and let them buy it at true market value not the way inflated value the lender has on paper. Otherwise, the attorney said, let them foreclose and then buy it at auction at a big discount. The lender (Househould Finance) was sued by half the state attorney generals and can't write any new loans. In this case, it was better to only have the husbands name on the loan. He died, so...

My understanding was that the main *disadvantage* of having only one spouse on the mortgage was in the case of if the spouse who is on the mortgage passes away and the bank finds out about it they may call the loan (even if the surviving spouse is keeping up with payments).

In this case the surviving spouse will need to either find a new lender (which may be very difficult at a difficult point in time of their life) or sell their home very quickly (again a difficult thing to do at a difficult time).

Edit - the prior posted did touch on this potential disadvantage but for whatever reason it sounds like the bank sorta worked with the surviving spouse, but I doubt all banks will be willing to do that and it may depend a lot upon the surviving spouse's income.

If two people are on the loan and one passes away can the bank call the note (based on that reason alone)?



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