Solo Mortgage Applications: A Comprehensive Guide

There are many reasons why someone might want to put a mortgage in only one name. This is a common scenario for married couples, especially if one spouse has poor credit. A mortgage is an agreement between a financial lender and borrower(s) to repay the amount borrowed to purchase a home. The more people on a mortgage, the more complex and expensive it will be, as each individual needs to be approved. A house deed, on the other hand, is a legal document that proves who holds the title to the property. When there are two names on a title deed, it means that there are joint owners of the property, and each person owns an equal share. It is possible to have a mortgage in one name and both names on the title deed.

How do I put a mortgage in only one name?

Pros and cons of a joint mortgage

In the UK, a joint mortgage is when you take out a loan to purchase a property with one or more people. It is a simple and straightforward process, but it can involve a few extra steps. It is mostly chosen by young couples, especially if they are buying their first home. When you have just started your adult life, you might not have many resources, so asking for a joint mortgage can be the solution.

Pros of a joint mortgage

• It allows you to combine incomes to borrow more and put down a larger deposit.
• You can access a higher amount of money for your loan.
• You could pay a higher instalment amount than what you could have afforded alone.
• You could also decide to pay standard, therefore feeling less of the burden of the monthly payments.
• If you are unable to make the mortgage payment, your partner or someone else on the mortgage may be able to cover your share.
• If you are listed on the deed but not the mortgage, you are still an owner of the home.

Cons of a joint mortgage

• If one borrower defaults on payments, the other borrower(s) will be held liable. This can be a big financial burden if one borrower is unable to contribute.
• If one spouse has a poor credit history, interest rates may become higher if they are included in the mortgage.
• If there is a foreclosure and only one spouse is listed on the mortgage, only their credit score will be affected.
• If the relationship or ties between the co-holders change, the responsibility to pay remains.
• In the case of a separation, all co-owners remain responsible for the payment of instalments until a bureaucratic solution is found.
• If you take out a mortgage with someone who has poor credit, you may not be able to borrow as much as expected.

Removing a name from a joint mortgage

The first step is to decide who, if anyone, will remain in the home. If no one will stay in the property, the simplest option is to sell the property and split the proceeds. If one person wants to continue living in the home, there are more options to consider, including what happens to the equity in the property.

If you and the other person on the mortgage agree, you can sell the property and use the proceeds to pay off the mortgage. Once the mortgage is paid off, your name will be removed from the mortgage agreement. Alternatively, you can buy out the other party by paying their share of the equity to take full control of the mortgage. This can be done through a lump-sum or instalment payment, but you should consider factors such as property valuation, payment terms, and potential legal complexities.

If you want to remove a name from a joint mortgage but not all parties are in agreement, things can get complicated. A legal challenge is an option, but it will be costly and time-consuming. Therefore, it is prudent to try to come to an understanding as quickly as possible.

If you want to keep the property, you will need to reapply for the mortgage in your own name to ensure the lender is happy with you as the sole owner and that the mortgage is affordable. Lenders will want to be sure that you can afford the payments, so they will carry out credit checks and you will need to provide evidence of all sources of regular income and existing financial commitments.

The most common way to remove someone from a joint mortgage is through refinancing the loan in the name of the person who will retain ownership of the property. This involves obtaining a new mortgage that pays off the existing one, releasing the other party from their obligation. If refinancing isn't an option due to financial constraints or credit issues, there are alternative paths to consider, such as a loan assumption or loan modification.

How to qualify for a mortgage in one name

There are several reasons why a couple may want to apply for a mortgage in one name only. For example, if one spouse has a low credit score, a joint application may be denied or result in higher interest rates. In such cases, excluding one spouse from the mortgage application can be beneficial. Additionally, if one spouse has low income or high debt, the debt-to-income ratio could be unfavourable and result in worse mortgage terms. Applying for a mortgage under one name could also help get better mortgage rates.

If you are applying for a mortgage without your spouse, it is important to note that the lender's decision will be based on one income, limiting how much you can borrow. The spouse applying for the mortgage will likely need a higher credit score and larger income. It is also worth noting that the home can still be foreclosed on if the mortgage is defaulted on, and the credit score of the spouse whose name is on the mortgage will be impacted.

If you are applying for a mortgage in one name only, you will need to understand how much you can afford, review your mortgage and financing options, and then choose a real estate agent to help you through the process of searching for and buying a home. You should also assess your financial goals, discuss your options, and consult with a financial advisor or real estate professional to determine what is best for you.

To qualify for a mortgage, you will need to meet credit score, employment, income, and DTI (debt-to-income) requirements. You can obtain a free credit report from each of the three major credit reporting bureaus to check your credit score and history. If there are any mistakes or errors on your credit history, you should contact the credit reporting agency to have the information removed or verified.

How to protect a spouse not on the title

If you're considering putting a mortgage in only one name, it's important to understand the potential risks and benefits for both spouses. While there may be valid reasons for this decision, it's crucial to ensure that the non-mortgaged spouse is protected. Here are some ways to achieve that:

Understand the Legal and Financial Landscape

Before proceeding, it's essential to comprehend the legal and financial implications based on your state laws. Most states are common-law states, where property acquired by one spouse during the marriage is owned solely by that person. In these states, you can leave your spouse's name off the house title, maintaining their financial separation and protecting the property from the other spouse's creditors. However, in community property states, any property acquired during the marriage is automatically considered jointly owned, making it challenging to exclude one spouse from the title.

Consider a Quitclaim Deed

If you're in a community property state and want to leave your spouse off the title, consider executing a quitclaim deed. This involves your spouse signing a document that relinquishes their rights to the property, which is then recorded with your county. This process establishes clear ownership and ensures that your spouse cannot claim ownership of the property later on.

Include the Spouse on the Title

While the mortgage and title are separate aspects of homeownership, including your spouse on the title ensures they have legal ownership rights to the property. This can be done without adding them to the mortgage, protecting their interests while keeping them free from legal responsibility for mortgage payments. However, it's important to note that being on the title alone doesn't provide legal protection from creditors.

Seek Legal Advice

Given the complexity of this situation, it's highly recommended to consult a real estate attorney or financial advisor. They can provide personalised guidance based on your unique financial and marital circumstances, helping you navigate the potential risks and benefits of various options.

Weigh the Risks and Benefits

Consider the potential drawbacks and advantages of putting the mortgage in only one name. While it can protect the non-mortgaged spouse from certain liabilities, it may also leave them unprotected in other ways. For example, the spouse on the title can sell or bequeath the property without the other spouse's consent. Additionally, the non-mortgaged spouse's assets and credit score may be affected if the primary borrower defaults on payments.

Estate planning with a single-name mortgage

Understanding Mortgages and Deeds

Firstly, it's essential to understand the difference between a mortgage and a deed. A mortgage is a financial agreement between a lender and a borrower to repay the amount borrowed to purchase a home. On the other hand, a deed is a legal document that proves ownership of the property. It is possible to have a single-name mortgage with multiple names on the deed, indicating joint ownership of the property.

Pros and Cons of Single-Name Mortgages

In some cases, it may be advantageous for only one spouse to be on the mortgage, especially if they have a higher credit score or income. This simplifies estate planning, especially in second marriages, as it safeguards ownership from potential creditors. Additionally, it can protect the other spouse's assets in cases of liability or foreclosure.

However, there are also disadvantages to consider. A single-name mortgage can decrease borrowing power as the combined income of both spouses cannot be considered. It may also leave the spouse not on the title unprotected and impact their ability to apply for other financing options.

Legal and Financial Considerations

The legal and financial implications of a single-name mortgage vary depending on the state and country. In community property states, all assets and debts are considered joint property, which can impact the eligibility and terms of the mortgage. It's important to consult with a qualified attorney or financial advisor to ensure compliance with residential property laws and protect your rights.

Estate Planning Strategies

If you're considering a single-name mortgage for estate planning purposes, there are a few strategies to explore. You can have both spouses as co-borrowers, with only one on the title, or include a spouse with better credit to qualify for a lower interest rate. Additionally, you can explore options like quitclaim deeds, which allow for the transfer of ownership while keeping the mortgage in one name.

In summary, estate planning with a single-name mortgage involves weighing the benefits against the drawbacks and ensuring compliance with legal and financial regulations. It's a nuanced process that often requires professional guidance to navigate effectively.

Frequently asked questions