Author Topic: should i use a cosigner with not great credit to refinance home equity loan  (Read 602 times)

wotan

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sister in law wants to refinance home equity loan. she has great credit, husband doesn't. should husband cosign. house is in sister in laws name only, but husband lives in house.

nereo

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sister in law wants to refinance home equity loan. she has great credit, husband doesn't. should husband cosign. house is in sister in laws name only, but husband lives in house.

For starters it depends on where your sister and her husband live, and what the laws are in that state.  Some states are communal property states, giving husband certain rights should they divorce or if she meets her untimely end.  Other states offer less protection.

First I'd look up with the legal ramifications are for where they live.  What happens with the house if she dies, defaults, or they get divorced?  Second, it never hurts to ask the lender how the terms might change if he co-signs.  It's very possible that the rate will remain the same, in which case the husband's credit score may benefit while no harm comes to your sister or their loan.  Third, the question of how finances are managed is up to the individual couple, and your sister and her husband are the only ones who get final say on whether the house is listed in her name on, or jointly. 

frugaliknowit

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What would the point of the husband co-signing be, especially if his credit is sub-optimal?  Why not just apply in her name, unless she does not have the income to support the payments...

nereo

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What would the point of the husband co-signing be, especially if his credit is sub-optimal?  Why not just apply in her name, unless she does not have the income to support the payments...

Potential benefits:
  • It could quickly raise husband's credit score
  • It legally establishes the property as co-owned in the event of divorce or death (less important in communal property states where this is the default)
  • husband can then sign documents related to the lease (e.g. homeowner's insurance, filing claims)
  • for some couples it is important to have both names listed, so one person does not feel subserviant to another. As a co-signer the sister could not change the terms of the lease (e.g. refinance) against the objection of the husband

just a few I can think of off the top of my head.  There are clear advantages for the husband, but only a few potential ones for the sister.

wotan

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sister has maxed out the amount of money she can borrow on the house. long story short, husband put house in wife's name over 10 years ago because of a gambling problem, which he does have have any more. he lives in the house alone and pays all the bills. he really does not make enough money with SS and work to stay above water, so she borrows on the house to pay the extra bills he can not pay.
i have advised them to sell house but he refuses.
i have recommended they see an estate lawyer to see if he has any interest in the house because his health is not the best. she worries if he has to go into a nursing home  the nursing home can put a lean on the house.
 thanks for all your comments.