Can One Spouse Take Out a Second Mortgage?

A mortgage on a primary marital residence will always involve both partners. While an individual spouse can obtain a mortgage in just his name, the other spouse must at least be aware of and consent to the transaction. Only in the case of a non-marital residence, such as an investment property, can one spouse take out a mortgage without approval from the other.

Reasons to Apply Without Your Spouse

There are two main reasons to get a second mortgage independent of your spouse. It is impossible to legally obtain a second mortgage on a marital residence without the spouse’s consent. A marital residence is the primary home occupied by a married couple. If the property is an investment property owned by one spouse, he can obtain a mortgage without his wife’s knowledge or consent, because she has no interest in the property. He also can obtain a second mortgage on the marital residence with his wife’s consent without making her a co-borrower or cosigner. This is advantageous if the spouse’s credit or debt will hinder the loan approval.

Pros and Cons

There are advantages and disadvantages to taking a second mortgage without your spouse. One spouse needs to show enough income to support two mortgage payments and any other debt listed on his credit report, including any joint obligations with your spouse. The bank sees debt for two people, but only income for one. An upside is that banks sometimes offer special incentives and rates for low-income homebuyers. If one spouse’s income will put a borrower over the threshold, her absence may qualify the other for more favorable terms. On a more personal level, taking on a second mortgage without your spouse’s knowledge or consent can cause marital discord.

The Process

Fill out an application at your chosen lender. Only include your information and signature. Submit supporting financial information such as tax returns, pay stubs, W-2 forms and bank statements. If submitting a joint statement, indicate which income and assets belong to you alone. These are the only figures the bank will use in the approval. Once you are approved, you will attend closing. Your spouse may or may not be required to attend, depending on the bank policy. The spouse absent from the loan will either sign the mortgage itself or a spousal consent form to be attached to the mortgage. The signature will need to be notarized regardless of whether the spouse attends closing.

Penalties for Non-Compliance

Obtaining a second mortgage without a spouse’s consent opens up the mortgagee and the bank to a number of legal issues. The deceptive nature of obtaining additional debt can be a major piece of evidence in a divorce case. The bank is open to lawsuits from the uninformed spouse and penalties from its regulators. The bank also loses out on its lien position as the spouse’s marital rights to the property take precedence if the mortgage was obtained without her consent.