Quick Mortgage Tip – Refinancing without being on the loan (or title)

March 17, 2007 No Comments »

If you and a spouse or family member are currently living together, but only one person is a borrower on the existing mortgage, it might be in your best interest to make the mortgage payments from a joint checking or savings account each month.

This could make it easier to refinance the same mortgage in the future, assuming you want to use the individual who isn’t currently on the loan and/or title. This need can come up if one borrower has significantly better credit than the other, and/or makes more money, etc.

There are myriad reasons why you’d want just one borrower on the loan, and if you can document a history of both individuals making the payments, refinancing should be possible with much much hassle.

Put simply, banks and mortgage lenders often want verification that whoever is taking over the existing loan has been making mortgage payments for at least the prior 12 months.

This also alleviates the need for title seasoning, so a borrower taking over the mortgage can simply be quit-claimed onto title at the last minute as well. Two birds, one stone.

This issue often comes up when the primary borrower has a poor credit score and elects to use another person, often a spouse, to refinance the loan to obtain more favorable financing terms. It can amount to big savings via a lower mortgage rate if the current titleholder/mortgagee has a low credit score and the spouse has a great score.

Alternatively, you could delay your refinance and attempt to improve your credit score so either borrower can be used to obtain financing. But for those in a time crunch, this method might prove to be a lot more effective.

Remember, this is a decision that has to be made in advance, so it’s something to think about long before you consider applying for another mortgage.


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