Can You Add Someone to Your Mortgage Without Refinancing?

Sharing a mortgage with someone can be a ray of hope for borrowers looking to reduce their debt liability. This can be particularly lucrative for married people who want to merge their finances, including their mortgage liability.

Can I add someone to my home loan without refinancing? The short answer to this is no, as lenders need to assess the income of the other applicant before they can be added to the mortgage. Unless the lenders re-assess the serviceability of the loan, they cannot hold another person liable for the mortgage debt.

In other words, including someone to your mortgage is easier said than done. Here’s what you need to know about the implications of adding your spouse to your mortgage.

The key motivation behind adding your partner to your mortgage is to maximise your chances of borrowing a larger amount. It is because the spouse’s income is also assessed as part of the loan application.

For instance, if your monthly income is $20,000 and you want to borrow a mortgage of $40,000, adding your spouse, who earns $ 20,000 every month, to the mortgage application can improve your chances of getting approved. Couples who want to upgrade their current home or buy a house in a pricier neighbourhood can benefit from a larger mortgage. In such cases, adding your partner's name to the mortgage is a preferred solution.

Adding your spouse to the mortgage application can also help you bag a better deal and get a lower interest rate than what you would have to pay if you took it out at a single person. Another reason you should consider adding your spouse to the application is that you can get a repayment holiday feature or an interest-only facility on your loan. Such relaxation may be helpful if you want to take a loan but don’t want to start repaying it immediately.

• The chief advantage of adding someone to your mortgage application is to improve your borrowing power. For example, if you find it challenging to qualify for home loans for bad credit on account of your poor credit score, adding your spouse, who has a better credit history, can make it easier to borrow.

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• If you do not have the minimum credit score for a home loan, but your spouse does, adding them to your loan application can be helpful.

• Adding someone to your mortgage also allows you to look around for a more competitive loan offer instead of settling for an inferior one.

• On the flip side, if the person you add to your mortgage is not eligible to borrow a loan, there is a risk of your joint application being rejected.

• Therefore, if the spouse does not fulfil key eligibility factors such as income, expenses, and credit score, the lender may refuse to recognise them as a co-mortgagor and reject the application.

• Once someone becomes a co-borrower on a mortgage application, their ability to take out other loans reduces until the previous loan is fully repaid. Any loan defaults can also reduce their credit scores, further impacting their borrowing ability.

• If your spouse has pending judgments or unpaid liens, creditors can attach a lien on the property whose mortgage you share with your spouse and force you to repay.

• You may need to refinance to buy out your spouse after a divorce or a split if you intend to retain your interest in the house.

The best way to add a spouse to an existing mortgage is through refinancing it in the new borrower’s name. Refinancing the mortgage can be a long-drawn process needing your to furnish a significant amount of documents, including:

• Your spouse's credit report
• Proof of income of your spouse
• Proof of income of the current mortgagor
• Personal identification details of your spouse
• List of current and outstanding debts in your spouse’s name

Even though you may think that opting for a refinance home loan to add your spouse to the home loan is a lot of paperwork, it is a good option, nevertheless. It can help you get a lower interest rate or better mortgage terms. It is also possible to get cashback deals to make refinancing more lucrative.

In any case, remember to consider the total cost of such a refinance before you decide. Also, take into account that you may need to alter the title deeds of your property to record the name of your spouse, as they may only be willing to be responsible for repaying the mortgage if they have a stake in the property.

If you or your spouse files for divorce and their name appears on the title deed of any property you own, the property will be split as part of proceedings regardless of whether their name appears on the mortgage.

Even if the name of your spouse doesn’t appear on title deeds or they have not made any contributions towards the loan repayment instalments, they may still be able to stake a claim in the property. In other words, since your spouse and you share a property, they have a legal interest in it.

That’s why you should think carefully before adding your spouse to your mortgage and altering the title deeds to include them as the property owner. Always seek appropriate legal advice before taking any decision.

Experts suggest that adding your spouse to your mortgage should only be undertaken after careful consideration. In fact, you should wait for a while before amending the title deeds and mortgage application -- in case the relationship doesn’t work as expected, there is no impact on your interest in your existing assets.