Deciding whether to refinance a mortgage shortly after a marriage depends on your goals. If it's simply to get your spouse on the title, there are easier ways. But if you have a monetary reason – lower interest rates, for example, or a chance to take cash out of the equity in your house – refinancing shouldn't be a problem, especially if your spouse adds income to your mortgage profile. You also should be able to add your spouse to the title during refinancing.
Deed Change Issue
If you want to add your spouse's name to the title, you'd better plan on refinancing. Simply adding a spouse's name through a quitclaim deed – in most states you'll probably need a lawyer to do this – could present problems. Most loans include a clause that you must notify the lender of a title change, which could mean full payment of your mortgage is due even if you're not planning to refinance. Executing a quitclaim at the same time you close on a refinance will circumvent the problem because you'll pay off your current mortgage in the process of getting the new loan.
In determining whether to refinance an existing mortgage, the lender will check the credit rating of both spouses on the application. If you or your spouse has less than an excellent score, you will probably have to pay a higher interest rate. If your spouse has a lousy credit rating, it might be better to wait until that score improves before refinancing. By the way, too many credit checks – such as a lender vetting you for a mortgage – can lower your credit score.
Adding the additional step and paperwork of a quitclaim deed to your refinance likely will increase the closing costs. However, you might be able to lower some of your other closing costs if your lender will let you use documents – such as the survey or the title search or the resale certificate – from your original purchase instead of paying to get new ones.
You can take cash out of the equity in your house through a refinance and use it for any purpose, including changing your home to fit your new lifestyle, paying off a spouse's debts, or taking a delayed honeymoon. In most cases, you can find lower interest rates for a cash-out refinance than you could for a home equity loan or second mortgage.
No matter how you process the transaction, adding your spouse to the title of a home for which you have some equity immediately splits the ownership 50-50. In the event of divorce, your spouse would be entitled to half of the house regardless of how long you were married, or how long you were the sole owner of the house before the marriage.
Dale Bye has spent more than 40 years in journalism, including 25 supervising reporters and editors at metropolitan newspapers and eight years as senior managing editor at a national sports magazine. He directed five newspaper-sponsored personal finance fairs. His fields of expertise include business and personal finance, sports, fitness and theater. Bye holds a Bachelor of Journalism from the University of Missouri.