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Spouse Debt and Mortgages When to Put Them on the Deed

Posted by  on Apr 16, 2009
 
Whether you're newly married or you're simply just beginning to look for a home, you need to start thinking about the spouse debt that you might have. Perhaps your spouse has a past history of student loans and credit card balances that haven't been taken care of yet, or perhaps there are outstanding medical bills that still need to be paid. In any case, this debt can be put into the mortgage that you put on a new home, allowing them to be 'free' of the debt that they carry, or, rather, allow them to pay off the debt over a longer period of time with a mortgage. However, with the divorce rate being so high, is this a good idea?

Dealing with Debt with More Debt

It's commonplace in today's society to try to pay off your outstanding debts with another loan. Though commonly referred to as consolidation, this kind of borrowing is actually detrimental in many cases. Because you might reduce the amount of money you need to pay each month, that extra money may start going to making more debt for yourself and for your family, which is going to cause you more problems.

If you aren't going to be disciplined about the way that you spend money, you might not want to include the spouse debt in with your mortgage. This kind of arrangement can often lead to additional financial problems and then an agreement as to how they will be paid off by the both of you — rather than just by your spouse.

How Much Debt is Too Much Debt?

Of course, the question becomes whether your spouse has too much debt for the both of you to handle on a mortgage. What you might want to do is sketch out the overall debt that you have in relation to how it will be paid off over time.

To see if it's feasible for your mortgage to include the debt, you should add up the debts that you have and list out the interest rates that are associated with each one to see the cost benefit.

When This is a Good Idea

When you're looking into a new mortgage or refinancing your old one, adding debt to the equation can be a good idea, too. If the interest rates on your mortgage are lower than the credit cards or other interest rates on your debts, you will actually end up saving money in the process of paying down those debts. If the interest is significantly lower, this can add up to a lot of financial flexibility.

To help you make sure that adding spouse debt is a good idea, you need to create a plan for making sure that you are using this extra flexibility to your advantage. Here are some ideas to make sure you are using this opportunity:

· Any extra money that would have gone toward debt payments should go toward your mortgage.
· Make a plan of how you will spend your money from now on — that is, make a budget for your family that you can stick to
· Make legal arrangements in terms of what each person is responsible for in the situation of death or divorce

When to Add Spouse Debt to the Deed

When you add your spouse's name to the deed, they will also become responsible for paying off the mortgage that has been created. And while this is generally what people do, if your spouse has a lot of debt to consider, you might want to keep your names separate from each other.

You should add them to the deed when the amount of spouse debt isn't that great and it isn't overshadowing the house debt that you already owe. If you can create a clear plan of how this debt will be paid off, and you both agree to the steps you need to take, you can then add your spouse to the deed.

How to Add Spouse to the Deed

By including your spouse in the financial payoff of the mortgage, you can then talk to adding their name to the arrangements. This would be handled by the bank or other lender that owns the house at the moment. Talk to the person that deals with your deed and then meet with them to see how to go about adding your spouse to the deed, as well.

If you're hesitant at all about this kind of mortgage, you might want to talk to a lawyer or financial consultant about the best possible choice for your current financial situation. They can help you sort out what could happen in future situations as well as right now.

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