Refinancing a mortgage in another name can be tempting for those with less than stellar credit. Trying to benefit from reduced payments or finding a way to keep one’s home from foreclosure are good enough reasons to consider any options available. The real question is though, “will a lender be agreeable to having someone else’s name on a mortgage when the person does not even own the home?”. In this case, probably not, so the house deed will need to be in the other person’s name, which then opens up another set of problems since the lender is not going to let you give his investment, your collateral, to someone else.
For the same reason that the lender cannot arbitrarily raise your interest rates, you cannot change the ownership, since you both are protected by the conditions of the mortgage contract in effect. Now let us assume you want to add a spouse or partner, or even another family member to the mortgage, that act would require refinancing the mortgage so that a new contract would be in effect. Another name would be added, recognizing that the person added would now have financial responsibilities as well, and whose credit could directly impact the deal.
Another scenario is co-signing the mortgage. Sometimes, newly married children will ask their parents to co-sign mortgages so that their excellent credit history can be used instead. And depending on the lender, this may be perfectly acceptable since the lender is guaranteed payment should they default. In many instances of co-signing, however, the lender may also require collateral from the co-signers.
In the case where one person needs to refinance to get from under their debt load, and another person has a good enough credit score to get better better refinance rates, it certainly sounds wonderful to put the mortgage in the “good” person’s name. But the home owner needs to understand a couple points before making a firm decision.
- In order to change the mortgage conditions, a refinance must be completed.
- In order to place another person’s name on the mortgage, the deed will need to be changed to include both names or transferred over to the other person solely. This means you are joint owner, or you own none of your home.
- There are legal and tax ramifications to changing the deed on a home.
- Ask whether the benefits outweigh the costs. Remember that costs are not just in dollars, but the emotional and personal cost of giving up your home.
- Needless to say, despite how attractive it may appear to seek refinancing in another name, it is a decision that must be taken very seriously.