“I do.”
This simple phrase is said by thousands every single day. Marriage is a giant leap for two people. This is not only the beginning of a lifetime commitment but a great responsibility expected from both people.
It the same way, many couples tie the knot and merge their finances after getting married. But if you own a home today, and rates are at their lowest, should you refinance the house first or tie the knot before you deal with your mortgage?
Adding Your Spouse to the Loan
For some, marrying first before working on refinancing your home works. If your spouse agrees to be added to the new loan, it can help you secure a better interest rate. If your spouse has a good credit standing and has a stable income, chances are a lender may approve you of a lower interest rate than that of your current mortgage when you refinance. This, to a lender, translates to a lower credit risk, given than your spouse’s debt-to-income ratio is relatively low.
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…Or Not
If your spouse has a less than perfect credit or has a high DTI ratio, you may choose to refinance your existing loan alone after the marriage. It is only practical to refinance the mortgage alone because adding your spouse to the new loan may decrease your chances of getting approved for a better interest rate. If this happens, your non-borrowing spouse will not be responsible for any debt. However, the non-borrowing spouse may be required to sign a document stating that he/she consents to the refinance.
Before you decide if you should add your spouse to the loan or not, examine your individual financial situations first. By doing so, you will be able to avoid bad decisions. You may start by reviewing both of your credit reports. There are some vital details in it that may greatly affect the interest rate that will apply to the new loan. Discuss these plans together. It will also help if both of you will speak with a lender to seek expert advice. Make sure you have your loan documents ready so the lender can take a look at them and arrive at a more realistic appraisal.
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