by Mary from Anchorage, Alaska and by Jim from Fort Worth, Texas
Ask Kate refinancing questions: Should newly married wife refinance onto husband's existing mortgage? How can a mother and son use gifts of equity to swap mortgages? My husband and I are newly married. He has a mortgage on his town home. We are now trying to get refinancing to lower his interest rate. Should I apply for refinancing on the mortgage with him?
Kate Answers: Should Newly Married Wife Refinance onto Husband's Existing Mortgage
I'll assume you know if you were to refinance the townhouse with your husband, the home loan also becomes your debt.
In fact, the responsibility for repayment would not be split between your spouse and you. The mortgage payment becomes the obligation of both borrowers.
I mention this because many assume the obligation is not weighed as heavily for co-borrowers.
Qualifying for Home Loans: Adding Co-Borrowers
Here is what you should know about co-borrowing for a mortgage. A co-borrower can strengthen a loan package and make it easier to obtain loan approval. On the flip side, adding a co-borrower can complicate refinancing.
Here are the 3 main categories to consider.
- Credit History
Monthly income and debts of both loan applicants are added together for qualifying purposes. But credit history is handled differently.
If your credit scores are higher than your husband's, that is good. However if your credit scores are lower, this can result in an inferior interest rate or not being able to refinance the townhouse at all.
I'd ask your mortgage originator if your package strengthens the refinance. Then you will have the facts to make a decision.
You'll also like this refinancing question from Ono who asks about adding his wife as a Mortgage Co-Borrower
. My answer sheds more light on the pros and cons of co-borrowing.
Ask Kate: Swapping Homes and Mortgages with MotherBy Jim from Fort Worth, Texas
I live in my mother's house but she pays the mortgage. She lives in my house but I pay the mortgage. This was done to help my mother, as being older, she could not keep up with her home and its land and pool.
Now, we want to have our loans reflect where we live so we can get the proper tax exemptions-such as homestead exemption. We live in Texas.
Not sure of the best way to go but it looks like new loans for both of us. We have heard about the gift of equity but am not sure how that works. We will most likely try to go conventional.
Her home (the one I live in) has a mortgage balance of 195k-would most likely sell for about 290k. From what lenders are telling us we each do a gift of equity letter.
Kate Answers: Swapping Homes and Mortgages with Mother
If the loan servicers would not allow both parties to assume each others' mortgages, you could consider taking the gift of equity route.
I describe this type of transaction that I once successfully originated and closed when the odds were stacked against the participants. You can read about it at Non Arms Length Transaction Home Loan Help
You'll also find links to additional Ask Kate questions and answers that will shed more light on your situation. Don't miss the comment sections at the bottom of each page.
P.S. Instead of a conventional loan, you may need to consider FHA financing because it offers more lenient gift of equity guidelines. Read how to reduce FHA mortgage insurance
before you call your lender so you know what to discuss.
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