Most couples who purchase a home together choose to apply for the loan jointly and take out a joint mortgage. There are some situations, however, when it may be more beneficial to apply for the home loan singly, in only one person’s name rather than both. Should you consider having only one name on the mortgage? Give some thought to these important considerations.
Facing Credit Problems
When one person has good credit and the other has credit that is not so good, it might be best to have the spouse with better credit apply alone. In most cases mortgage companies will use an averaging system to qualify you for an interest rate, taking both party’s credit scores into consideration.
If one person has credit problems it could mean a much higher interest rate and therefore much higher payments on the loan. This can often be avoided by having only one person apply for the loan. You can always refinance later, when the other person’s credit has improved, and apply jointly at that time.
When one person is going into the marriage with a lot more in assets than the other, or when both want to protect their assets, a pre-nuptial agreement is used. While this only really impacts assets earned or purchased prior to the marriage, those who are considering such an agreement might also want to think about keeping home purchases separate.
In the event of a divorce, the proceedings are simpler when there are fewer joint assets. Of course, no one wants to go into a marriage thinking they will get divorced, but the reality of the statistics shows that divorce is all too common. Applying for a solo loan rather than a joint one can keep things simple in the case of a divorce. This is obviously something that must be agreed upon in advance by both parties.
Should You Apply Alone?
There are any number of reasons that a couple may decide to keep the home in only one name. Credit is the most common reason, although it’s important to note that being on the mortgage can help the other party build a better credit record.
The decision to apply for a mortgage in only one name is a personal one and requires some time spent discussing all of the ramifications of that decision. It is a personal one for everyone, and it’s important to take the time to weigh the pros and cons.