Credit Control: Tips For Managing Your Money

One Versus Two Names On A Mortgage Loan

11 August 2015

Levi Bradley

If you're shopping around for a mortgage, you may get the suggestion to leave your spouse or yourself off the mortgage. While there are valid reasons for doing this, there are also valid reasons for putting both names on the mortgage paperwork. Compare the reasons for each route before following anyone's advice.

One Name Only: Better Credit

If you and your spouse have vastly different credit scores and histories, leaving the worse score and history off the mortgage application can enable you to get better interest rates and have a higher rate of acceptance. Mortgage lenders often take the lower score and base the offer on that. By leaving that low score off the application, lenders obviously have to go with the better score.

One Name Only: Limiting Damage

Anyone who has his or her name on a mortgage application or loan will see effects if things get rough. If he or she can't make the payments, only he or she will be affected credit-wise. This protects the credit of the spouse and makes it easier for the couple to find more credit later on by using the other spouse's credit history and score.

Two Names: Resentment

But that tactic to limit credit damage can backfire by creating resentment. If someone's credit gets hit by late mortgage payments, an inability to pay at all, or foreclosure, that person could feel as if he or she were taken advantage of. A feeling of, "Why me, why not other people too?" can quickly form. Repairing credit can take time, plus there's no guarantee you and your spouse will remain together. Imagine sacrificing your credit due to late payments when you and your spouse couldn't make them -- and then add in your spouse leaving you. There goes that preserved credit that was supposed to make your life easier while your credit recovered.

Two Names: Death Benefit

Having two names on the mortgage is very important if one spouse dies. The other spouse can just take over complete ownership of the house and continue making payments with the current terms. But if the mortgage is under one spouse's name, and that spouse dies, the surviving spouse could be hit with a request from the bank to pay up -- in other words, the bank could call in the loan and demand full payment. The spouse would have to get a new loan with potentially worse conditions in order to stay in the house.

If you'd like to discuss one versus two names on a mortgage loan further, contact mortgage lenders in your area. The lenders will let you know if there are any local issues that make one option more attractive than the other, or if there are other benefits that you need to know about.

For more information, contact McHenry Savings Bank or a similar location.

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