It’s quite possible to live in a house for years without your name being on either the title or the mortgage. In fact, you probably did that very thing from birth until adulthood. But now that you’re a full-fledged grown-up, you’ll have a vested interest in having your name associated with the place you call home. This primarily applies to the home’s title, although there are repercussions for not having a part in the mortgage, as well.
Names on the Title
When you sign papers to close on a home, you decide how you want your name to appear on the title. If you’re buying a home as a couple, this means you make the decision whether to add both of your names or just one. Often circumstances change after closing on a home, however. A couple could get a divorce or a person who bought a home solo may find true love and get married. A solo homeowner could also decide to bring a friend in as a roomie to cut down on the high costs of a monthly mortgage.
Not having your name on your home’s title can be a big deal. If you and your co-occupant decide to part ways, your name is not on the home, so technically, you’re homeless. If you have been paying half of the mortgage for months or years, that means the money you put into the home is essentially gone. You’ll be forced to move out and the other person can remain in the home or sell it. Either way, eventually your ex-roomie will be able to sell the home and earn the rewards of any equity it built up over the years. If, however, you share a home with someone who dies, you may find that their death leaves you in a bit of a pickle, especially if you weren’t married. To protect yourself, either get your name on the title through a quitclaim deed or make sure they have a will that turns the house over to you in the event of their death.
Names on the Mortgage
It may sound like a good deal to have your name on a title but be absent of any legal responsibility for paying it, but you’d be wrong about that. If, for some reason, the person on the mortgage decides to stop paying, you can bet the lender will come after you for the money if your name is on the title, especially if the home is headed toward foreclosure. At the very least, they can seize the home if payments aren’t made, leaving you to make other living arrangements. If the owner does stop paying, you may be able to refinance the home in your own name, however.
For the person whose name is on the mortgage, though, the risks are even higher. If the other person is on the title, that person could legally sell his ownership in the home to someone else without your permission. This would make you co-owner of a house with someone you didn’t choose to own a home with.
In the event that the homeowner dies, the individual who inherits the home can take over the mortgage, even if his or her name isn't on it. This is because the mortgage insures the house, not the person.
For couples planning to co-own a home, the safest course of action is to put the property and mortgage in both names. If you choose to move into a house owned by one of you, you can do this through the use of a quitclaim deed, which ends your ownership rights to that home. You would then create a new deed that names both you and your other person as co-owners. However, doing this in no way changes the names on your home’s mortgage.
If you want to add another person to your mortgage, one of the safest ways is to simply refinance the loan. You may even be able to get a better interest rate by doing so, especially if things have changed since you originally took out the loan. It may be easier to simply create a will that names the other person as beneficiary of the home if you die, especially if you think you might be moving within the next few years.
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.