A question was recently asked whether an unmarried couple could both be on the deed, but only have one of them on the mortgage. My initial reaction was no ...but I did some research and here is what I found out, and this can apply to both married and non-married couples:
- It can be done. It is usually done when one party has stable income and good credit and the other does not, or if one is steadily employed and the other is self employed and the self employment history is hard to prove-up.
- It might be done if only one party can qualify for the first time home buyer credit and that person can individually qualify for the mortgage.
- Not all mortgage companies will agree to this. If they do agree to it they would likely require the non-responsible party to sign something acknowledging the mortgage company's lien is superior to their claim to it. Also, they may require the non-responsible party to sign some type of security agreement on the note.
- If the non-responsible party is added to the deed after the mortgage was originated and without the mortgage company's permission the non-responsible party's rights will be subsequent to the mortgage company. If adding a name to the deed afterwards is considered, watch-out for an acceleration clause in the mortgage agreement that would make the mortgage due in full.
- The responsible party is the only one who can claim the interest deduction for income taxes.
- Both parties should be able to claim 1/2 the real estate taxes paid on the property for income taxes.
- If the couple is unmarried they may, however, be considered a common law marriage if certain conditions are met. If there is a split then community property issues can arise, especially if both incomes went to pay the monthly payment.
Texas is a community property State and what someone has going into the marriage they keep going out of the marriage ...and what is acquired during the marriage is community property. Community property can be tricky so potential issues could arise if there is a split.
- If the responsible party passes away it will likely create questions as to how the non-responsible party has legal claims to the property. Because of this, there probably needs to be something in writing (like a will) that states the responsible party's intentions for the property.
- If the non-responsible party declares bankruptcy it will likely not affect the mortgage on the home.
The bottom line is that it can be done, which is the short answer; but, there could complications in the event of a split or death of the responsible party and mortgage tax deductions are not always clear.
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