If both spouses' names are on the title or deed of trust, both must sign to obtain a home equity loan. If only one spouse is on the title or deed of trust, it can be complicated to get a home equity loan with only one signature. It may depend on the state of residence.
Home Equity Loans on Joint Deeds
If you and your spouse are both signatories on the title or deed of trust for your home, ordinarily you both have equal and undivided shares in the property. Whether the property is in a community property rather than a common law state is irrelevant in this instance because the deed itself already establishes that the property belongs to the "community" -- that is, to both the husband and wife. In the absence of some other constraining document, such as a prenuptial agreement, this property not only belongs equally to the two parties, but the shares are undivided.
Because the shares are undivided, a home equity loan signed by only one spouse necessarily encumbers an ownership share by the other party and is illegal.
Home Equity Loans on a Solely Owned Residence
If a married couple reside in a home for which only one of the two parties holds title, the situation can get complicated, but the nature of the complication depends on the specific circumstances.
Community Property States
If the residence is in a community property state, it is unlikely that the house actually belongs to only the spouse whose name is on the title. The whole idea of community property is that a husband and wife share equally what they hold. Even if the house was owned by one of the parties before the marriage, over time the normal use of the house in a community property state is likely to eventually break the separateness of the holding. If, for example, the nonsignatory spouse ever contributes to household maintenance, repair or improvement, that breaks the separateness of the holding and, arguably, it becomes community property. In that circumstance, neither spouse can take out a home equity loan without the signature of the other.
This is a difficult eventuality to avoid in a community property state because even if the spouse on the title is the primary breadwinner and also pays the mortgage, she is probably paying the mortgage with money earned during the marriage. In a community property state, those earnings are community property, and therefore the house also becomes community property.
As a practical matter, few lenders in a community property state will extend a home equity loan to a spouse who is the sole titleholder without the other spouse's signature. Because commingling of assets can happen so easily, without an extensive investigation and audit, there is no way of the lender knowing if the house is still single rather than community property.
Common Law States
The situation is somewhat different in common law states -- states that do not recognize an inherent undivided ownership of all property acquired by either spouse during the marriage. The difference, however, lies more in theory than in practice.
In theory, if one of the spouses owns the property entirely -- is the only party named on the title -- that party has a right to obtain a home equity loan without the consent of the other party. In practice, however, lenders will probably ask the borrower to provide written assurance that the loan is made with the other spouse's consent. If circumstances change -- in the event of a divorce, for example -- the other spouse may be able to show that he had acquired an interest in the house before the initiation of the home equity loan by the borrower. This interest can be acquired, for example, if the spouse who is not on the title makes a mortgage payment. In that event, he could sue the lender for violating his ownership rights by encumbering the property with a mortgage without his signature or consent.