Is It Good to Have One Mortgage & Two Names on a Title?

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Because homes are such expensive purchases, most people who want to buy a property approach lenders such as banks for mortgage loans. They use the money from the loan to secure the property and then pay the lender back in monthly payments. Homeowners sometimes want to add a person to a property title but still only have one name on the mortgage. Although this is possible, it typically is not a wise real estate or financial move.

Credit

  • Ideally, when two people buy a home together, both parties have good or excellent credit. However, this is not the case with all mortgages. Sometimes only one of the prospective buyers has credit good enough to qualify. In this case, having one mortgage but multiple people on the title may be a good thing, because it allows you to purchase the home and extend ownership rights to your partner even if your partner's credit isn't stellar.

Liability

  • Being on the title for a property doesn't mean you are liable for the mortgage in many cases. Of course, this depends on whether you live in a community property or separate property state. In a separate property state, you are responsible for any assets or debts you acquire. In a community property state, you and your partner are one financial entity, so you are responsible for her debts and assets and vice versa. In a community property state, your partner may be held liable for the mortgage even if her name isn't on it. Most states are separate property states. If you take on a mortgage by yourself but have multiple people on your deed, you give away some ownership rights without giving away any of the liability. This is why financial advisors and real estate professionals in separate property states typically advise against having someone on the deed who isn't also on the mortgage.

Lender Ownership

  • Not all mortgage lenders will agree to let you have someone on your deed if he isn't also on the mortgage. The reason is because anyone on the deed has legal rights to the property -- the mortgage lender may get into the uncomfortable position of having to assert its right to the property with someone not involved in the mortgage in the event it must foreclose. Some mortgage lenders even have acceleration clauses that let the lender call in the mortgage debt in full if you add someone to the deed without permission for this reason. The mortgage lender may have the person not on the mortgage sign basic paperwork recognizing the lien on the property to avoid legal issues. This means that the potential exists for the owner who is not on the mortgage to be forced from the home in foreclosure even if he has nothing to do with the mortgage.

Separation of Property

  • Anyone named on a deed has a legal right to a portion of the property. If you name someone else on your deed, this makes it harder to separate assets in the event you and your partner separate and divorce. Because you don't have 100 percent ownership, you legally can't sell the property without the permission of all the people on the deed, which may be problematic if you can't afford the mortgage later. It is possible to file a motion for partition to get back all of the property rights, but to do this you should have an attorney, and hiring a good lawyer may be costly.

The Bottom Line

  • In most cases, having one mortgage and two names on a title will cause more legal trouble than it avoids. It is a financially risky move, even if you are in a separate property state. Only do this if you must due to credit issues.

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