It's common for married couples to own property together and for the mortgage loan to be in both names. However, you might be in a situation where you want to refinance a mortgage independent of your spouse. Perhaps you own a second home, or your spouse might have less-than-perfect credit that would keep you from getting a better interest rate with refinancing. Whatever the case, in some states you might need your spouse's signature to refinance -- even if she isn't borrowing.
Many homeowners refinance their mortgage loans to take advantage of lower interest rates, to consolidate other debts, or to get cash back by borrowing against the equity. A refinance loan is a completely new loan that pays off the existing mortgage loan. Then your new payments start, according to the terms and conditions of the refinance loan.
The approval qualifications for a mortgage refinance are similar to the original mortgage's qualifications. You'll need a good credit score, enough income to make the payments, and a low debt-to-income ratio. A refinance loan is the only way to add or remove a borrower from the mortgage loan.
Most states practice common law. Under this system, spouses can own property together or separately. If you're the sole owner of a house, you can refinance without your spouse's signature or consent. If you own a property together and both of you want to remain as borrowers on the refinance loan, then your spouse will need to apply for and sign the refinance documents. However, if you are both borrowers on the existing mortgage, you can refinance by yourself if your application is approved.
There are nine community property states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, property purchased by one spouse during the marriage is considered to be equally owned by each spouse, unless otherwise stated. Likewise, debts acquired by one spouse are the responsibility of both spouses.
If you want to refinance a loan on a property, your spouse will be required to sign the documents. However, if you hold the title as a sole owner, your spouse won't have to sign. Depending on your state's laws, your spouse might have to sign a consent form or another legal contract.
Loans insured by the Federal Housing Administration have special circumstances. Under the FHA's guidelines, your spouse might have to sign paperwork to consent that she isn't a borrower. Additionally, she'll probably be required to submit to a credit check even if she's not applying for the refinance loan.
In some states, the lender takes the non-borrowing spouse's debt into consideration for the total debt-to-income ratio. If you're attempting to refinance your loan while going through a divorce, these rules will apply until the divorce is finalized.
- Federal Reserve Board: A Consumer's Guide to Mortgage Refinancings
- Total Mortgage Services: FHA Home Loans With a Non-Purchasing Spouse
- FHA.com: What Is a 'Non-Purchasing Spouse?'
- FHA.com: FHA Streamline Refinancing Rules for Adding/Removing Borrowers
- U.S. Chamber of Commerce Small Business Nation: Community Property
- Nolo: Marriage & Property Ownership: Who Owns What?