The moral implications of offering up your house without your spouse's knowledge aside, a lender can't legally give you a mortgage without his or her consent. If you wish to get a loan on the house you occupy as your primary residence with your better half, they will have to either co-sign or consent to the deal. The reason behind this process is that losing that property in the event of default, will significantly impact your spouse as well as yourself.
Why Consent Is Required
Even if you own a property in your name only, your spouse still has rights to that property as your marital residence. The idea being that a married couple lives together and shares the home, no matter what the formal ownership. While, in a divorce situation, the ownership and even the down payment can be traced back and negotiated in the settlement, both of you maintain rights to that residence. A mortgage is a heft contract that could end up costing you and your spouse the property. Your spouse can end up homeless due to an obligation he or she wasn’t aware of (and probably didn’t approve of).
Consent Versus Co-Borrowing
Since getting a spousal consent is a pretty rigid requirement, it begs the question, “why not just co-borrow?” The answer usually falls into one of two categories. The first, which will unravel pretty easily, is that one spouse is in a jam or wants to use the money for something the other wouldn’t approve of. These situations almost always fall apart once the borrower realizes that he or she can’t proceed without consent. The other, more legitimate reason, is that one spouse has poor credit, high debt or both which would prevent the lender from approving the loan. If a single spouse can qualify on his or her own, they can be the primary borrower with the other spouse’s blessing.
Executing a Spousal Consent
A spousal consent is executed in one of two ways. Most commonly, it is a simple one-page rider attached to the mortgage document that is recorded with the county clerk. It states that the spouse is aware of the mortgage in X amount of dollars and that he or she consents to the lien being placed. Another way a spousal consent is given is through a clause known as hypothecation. The mortgage itself is in the name of both spouses, but the hypothecation clause states that the non-borrowing spouse is agreeing to offer the property to support the obligation of the borrowing spouse. Either way, the process can’t move forward without the non-borrowing spouse’s signature.
Consequences of Not Obtaining Consent
It’s fairly obvious that the borrowing spouse will be in hot water if he or she obtains a mortgage without the other’s consent. When the inevitable divorce proceedings occur, it will be very effective ammunition for the wronged party. However, it is not just the dishonest spouse that will end up in trouble. The non-borrowing spouse can sue the lender and will likely end up with the property and a nice settlement to boot. Mortgage companies are well aware of these consequences making it very difficult to obtain a mortgage without spousal consent.