First comes love, then comes marriage. Then comes your first baby: a home with a mortgage. And if one spouse already owns a home, refinancing the existing loan might make the most sense for a couple’s shared financial future.
“Newly married couples may need to undergo a process to combine their households,” says Shelby McDaniels, channel director for corporate home lending at Chase. “And if one spouse owned a home before marriage, the couple can refinance their loan to add a spouse to the mortgage and title to share the responsibility of the property.”
Indeed, going from singledom to married life means you will be sharing your life and your money. So here’s what you need to know about the right ways to refinance your mortgage loan as a couple.
The biggest reason to refinance once you get married is simple: You’ll likely save money.
To see how much you might be able to shave off your current mortgage payments, crunch the numbers on an online refinance calculator. Remember, even if your mortgage payment goes down only, say, $50 per month after refinancing, that savings will seriously add up over a 15- or 30-year loan.
Assess your situation before refinancing
“Both spouses are not required to be listed on the mortgage,” says McDaniels. However, if you already own a home and want to add your spouse to the loan to share responsibility for repaying the loan, refinancing is your only option. And if your spouse has good credit and a stable income, adding their name to a refinance should help you snag a better loan.
So the first thing a married couple should do when planning to refinance is to assess their financial situation and determine their short- and long-term goals.
“If your goal is to reduce your monthly payments as much as possible, you will want a loan with the lowest interest rate for the longest term,” says McDaniels. “On the other hand, if you want to pay less interest over the length of the loan, you may want to look for the lowest interest rate for the shortest term.”
Shop around for lenders
Make sure to review different lenders and loan options to determine the best combination of interest rates, costs, and services provided. And while it’s essential to work with someone you can trust—such as your current bank that’s familiar with your financial health—it’s crucial to meet with several lenders.
“Doing your research and scouting out lenders and their fees, interest rates, and availability can help you find a refinance deal you’re happy with,” adds McDaniels.
“I would advise you to at least check with two different lending companies before you make your decision,” adds Dirk Hellige, mortgage loan originator and the preferred lender for Realty ONE Group, based in West Des Moines, IA. “You want to ensure you get a good deal, so I recommend comparing at minimum two lending companies.”
How to prepare for a refinance
Both spouses should prepare before applying for a refinance by crunching the numbers on their combined yearly incomes, retirement account balances, and checking and savings account balances.
“It also helps to have an idea of what your home value is today, and be sure to be conservative with that figure,” says Hellige. The number will help you find your home’s loan-to-value ratio, which helps lenders determine risk.
And remember, once the refinance is approved, it doesn’t mean your spouse owns the home. It means only that they are now also responsible for repaying the mortgage. You’ll need a quitclaim deed to complete the transfer of ownership from one spouse to both.
Why you wouldn’t add your spouse to a refinance
“If one spouse’s finances don’t qualify for the loan, it may be in the couple’s best interest to leave the loan as is,” says McDaniels. “Another option is to refinance with just one name listed.”
However, not adding a spouse to a refinance doesn’t mean they can’t be a co-owner of the home.
“For couples who decide only to include one name on the loan, the nonborrowing spouse can be added to the title,” says McDaniels. “The nonborrowing spouse will hold ownership rights but will not be responsible for paying back the loan.”
According to McDaniel, there are other reasons when refinancing as newlyweds doesn’t make sense. These include if the couple plan on moving in the short term or paying off their mortgage within a few years. And if a cost analysis of refinancing the loan amount doesn’t result in a long-term benefit—or there’s a limited amount of time left on the current mortgage term—it might be best to skip a refinance.
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