Dear Dr. Don,
My spouse and I have been offered a refinancing at a fixed 5.75 percent on a 20-year mortgage with biweekly payments each month (one payment to interest, one payment to principal each month). However, there is no cash out, as this option is unavailable.
There’s one catch: the debt instrument must be in his name only. His credit is good and mine is presently poor. What are the financial implications to me as co-owner of the house if my name is missing from the mortgage?
— Ms. Al
Dear Ms. Al,
Regular readers of this column know that I’m no fan of the biweekly mortgage. To save them from reading about it all over again, you can take a look at the earlier column, “Little advantage to biweekly payments.”
I don’t understand the split principal and interest payment structure you describe, but there’s no need for this specialty type of financing. I’d suggest a conventional 30-year fixed-rate financing.
As I write this, the national average for this type of financing is 5.92 percent. If you want to make additional principal payments to pay off the loan faster, you can do it with the conventional financing. Use Bankrate’s Mortgage calculator to check out how this can work for you.
As you point out, there’s a difference between being named on the loan and named on the deed. If your husband’s credit is good enough to get approved for the loan, the fact that you are not being named on the note keeps your credit from being scrutinized by the lender.
The biggest downside to you is that your credit report won’t benefit from the payment history associated with the mortgage. The upside is that you aren’t responsible for the loan payments — unless you live in a community property state.
To protect your interest in the property, make sure you remain named on the deed. However, until the loan is paid off, the lender’s interest in the property will always come before yours.