Published DateAfter the wedding and the honeymoon, many couples will face a different kind of commitment issue: Should they take out a mortgage together? And if one spouse already has a home loan, does it make sense for the other to be added onto it?
While the inclination may be to combine finances, some couples may want to keep them apart, financial experts say, especially if this is a second marriage, or if one spouse has experienced a spate of unemployment and a less-than-stellar credit report.
"Leave well enough alone," said Lori Price, who runs the Price Financial Group, a financial planning service in Wilton, Conn. "If one person is good enough to qualify for the mortgage, you don't need them both on the mortgage."
Price says it makes more sense to have one partner unencumbered with debt. "I would never look to put someone's name on a liability," she said, unless perhaps that person was needed to qualify for a favorable refinancing.
Neal Diamond, a mortgage broker and real estate investor in Commack, N.Y., advises against commingling for those who are self-employed. He said he was in the process of transferring to his wife the deed to the home that he and she had jointly owned for years, so that a lien cannot be placed on the home should he face a lawsuit or other issues in his business.
Nearly 2.1 million couples were married in 2010, the latest year for which data were available from the Centers for Disease Control, which tracks this information. The median age for a first marriage has been steadily rising for both men and women, to 26 for a woman and 28 for a man, from 20 and 23 in the 1950s, according to census data, while almost a quarter of adults 50 and older have been married at least twice. This increases the likelihood that one or both newly married spouses may already own a home.
"It's way more complicated for a second marriage," said Price, noting that both partners may also have other family needs to consider. Several of the couples she has counseled, she said, have chosen to keep their finances separate.
This approach may be especially worthwhile in the event of a short sale, when a property is sold for less than the balance of the mortgage, or a foreclosure. Both transactions remain on a credit report for seven years.
Some lenders allow a new borrower to be added to a loan; others do not, because they no longer own the loan or because the loan has a provision that prohibits it, said Edward Ades, a partner in Universal Mortgage in Brooklyn. The surest way to bring both borrowers together on the home loan is to refinance, especially now with very low rates, he added.
Before couples double up on the mortgage, they may want to consider whether they expect to move into a bigger home in the near future or whether the mortgage is more than halfway paid off (in which case the principal is being paid down more rapidly), Diamond said. They could place the second person on the deed and title to the property, he said, or they could put together an agreement giving the person whose name is not on the mortgage a percentage of the home's market value in the event of death or divorce.
Lenders sometimes require the second person to be on the deed for six months before they can be added to the mortgage, often via refinancing, said Erin Lantz, the director of Zillow Mortgage Marketplace.
"If your partner has good credit, it may be helpful," she said, adding that a partner with poor credit could hinder refinancing or another house purchase.
Couples who want to buy a home together should discuss their credit scores and what they want in a home, Lantz said. Then they need a plan for the down payment, which is typically 20 percent of the purchase price.