Can One Spouse Get A Home Equity Loan?

Home equity loans allow homeowners to turn their home equity into cash that can be used for debt consolidation, home improvements, or other expenses. Married couples can tap into their home equity as co-borrowers if each meets the lender’s credit and income requirements.

Before taking out a joint home equity loan, it’s important to understand how it works and what financial responsibilities are conveyed to each borrower.

Getting a home equity loan can be a great way to access funds for home renovations, debt consolidation, or other large expenses. But if you’re married, you may be wondering if you can get a home equity loan on your own or if you need your spouse to be involved. Here’s what you need to know about getting a home equity loan as a married individual.

What Is A Home Equity Loan?

A home equity loan is a type of second mortgage that allows you to borrow against the equity in your home Equity is the portion of your home that you own outright, calculated by subtracting the amount you still owe on your mortgage from the current market value of your home

For example, if your home is worth $300,000 and you owe $200,000 on your mortgage, you have $100,000 in equity. A home equity loan allows you to borrow against a percentage of that equity, up to 85% in most cases.

With a home equity loan, you receive the full loan amount upfront in a lump sum payment. The loan is repaid over a fixed period of time usually between 10-30 years, with fixed interest rates and monthly payments.

Can A Married Person Get A Home Equity Loan Alone?

The short answer is yes, a married person can absolutely apply for and receive a home equity loan on their own, without involving their spouse.

According to the Equal Credit Opportunity Act (ECOA), lenders cannot discriminate against you based on your marital status. So whether you’re single, married, divorced or widowed, you have the right to apply for credit individually.

As long as you meet the lender’s creditworthiness and income requirements, your marital status should not impact your ability to get approved for a home equity loan on your own.

Requirements For Individual Home Equity Loan Approval

While being married doesn’t preclude you from getting a home equity loan solo, there are some basic requirements you’ll likely need to meet for approval, including:

Sufficient home equity: Most lenders require at least 15-20% equity in your home to qualify for a home equity loan. The more equity you have, the better.
Good credit score: You’ll generally need a minimum credit score around 620-640 to be approved, but scores of 700+ have the best chance.
Manageable debt-to-income ratio: Your total monthly debt payments, including the new loan payment, should not exceed 43-50% of your gross monthly income.
Strong payment history: Having a history of paying all your bills on time will help demonstrate you are a reliable borrower.
Income/employment: You’ll need stable income and employment to qualify for the loan on your own.

As long as you meet these types of requirements, there should be no need for your spouse to co-sign or be involved in the loan process.

Pros Of A Solo Home Equity Loan

Getting a home equity loan on your own as a married borrower has several potential advantages:

Simplicity: You don’t have to coordinate schedules or paperwork with your spouse. The process is simpler when you go solo.
Privacy: Depending on your situation, you may prefer keeping financial matters private from your spouse. An individual loan allows this.
Better rates: If you have a higher credit score or income than your partner, you may qualify for better loan terms on your own.
Less risk: If the loan goes into default for any reason, it only impacts your credit, not your spouse’s.

Cons Of Individual Home Equity Loans

There are also some potential downsides to think about with getting a home equity loan on your own:

Higher debt burden: Being solely responsible for repayment increases the debt load on you. Make sure you can afford it.
Less funds available: Most lenders limit home equity loans to 85% loan-to-value ratio. With joint income factored in, a couple may qualify to borrow more.
Marriage concerns: Taking out an individual loan against a jointly owned marital home could cause trust issues and marital discord if not discussed upfront.
Shared collateral: Even if your spouse isn’t on the loan, the home you share is still used as collateral, putting their interest at risk too.

Tips For Married Applicants

If you want to move forward with an individual home equity loan as a married person, keep these tips in mind:

Be upfront with your spouse so there are no surprises or misunderstandings later on.
Only borrow what you can comfortably afford to repay on your income alone. Don’t overextend yourself.
Make payments on time every month to protect your credit and avoid putting your home at risk.
Use loan funds only for their intended purpose, like home improvements that may also benefit your spouse.
Consider alternatives like borrowing from retirement accounts that don’t put your home at risk.
Talk to the lender about title ownership issues if the home is jointly owned but only one spouse applies.

The Bottom Line

Married borrowers have the right under the ECOA to apply for home equity loans individually, without requiring a spouse’s participation. However, you’ll still need to meet the lender’s qualification criteria on your own merits. While solo home equity loans have advantages, they also come with responsibilities and risks to weigh carefully. Being upfront with your spouse and only borrowing what you can comfortably handle are keys to success when getting a home equity loan by yourself.

Does a Spouse Need to Be a Co-Borrower on a Home Equity Loan?

A spouse does not need to be listed as the co-borrower on a home equity loan. Still, it’s important to note that, even though a spouse needn’t co-sign, they still may need to consent to the loan in writing.

Generally speaking, a lender cannot require a spouse to co-sign or act as a co-borrower for a mortgage loan if the other spouse is able to qualify based on their own creditworthiness. However, the spouse who is not listed on the loan could be required to sign documentation to make the property that’s used to secure the loan available to the lender should the borrower default.

There is a simple reason for this: The lender wants reassurance that should it be forced to foreclose on the home for default, there would be no obstacles preventing it from assuming ownership of the home. Thus, your spouse might be asked to sign a document that allows the lender to create a valid lien on the home or pass clear title to the lender.

Spouses who act as co-borrowers for a home equity loan are still responsible for paying the debt if their spouse passes away.

Home Equity Loan Basics

The amount that you can borrow with a home equity loan depends on several things, including:

As a rule, lenders prefer that you borrow no more than 80% of your home equity. A professional appraisal is usually required to determine how much the home is worth before a home equity loan is approved.

If a borrower defaults on a home equity loan, the lender could attempt to recoup the debt by initiating a foreclosure proceeding.

Divorce Lending: Understanding an Equity Buyout

FAQ

Can you get a home equity loan without your spouse?

One spouse makes all the income: If you earn all your household’s income, a lender may allow you to apply for a home equity loan or HELOC without your spouse depending on where you live.

Do both homeowners need to be on a home equity loan?

Couples or co-homeowners do not have to get a home equity loan in both names if one borrower is able to qualify for favorable loan terms based on their creditworthiness alone. However, lenders can require the non-borrowing spouse to sign documentation consenting to the loan.

Can I get a home equity loan if my name is not on the mortgage?

To get a home equity loan or HELOC, you’ll need to be on the deed. However, your name doesn’t have to be on the deed if you cosign with someone who is on the deed.

Can I apply for a loan without my spouse?

If you don’t live in a community property state, you live in a common-law state. This means that you’re not required to share ownership of property you acquire while you’re married. In a common-law state, you can apply for a mortgage without your spouse.

Can a spouse get a home equity loan?

Co-borrowers for a home equity loan can also be two spouses. Spouses who want to get a joint home equity loan will each need to meet the lender’s requirements for approval. Again, that can hinge on credit scores, income, debt, and the amount of equity that’s accumulated in the property.

Can I get a home equity loan if I divorce?

Yes. It’s possible to give responsibility for a home equity loan to one partner as part of your divorce decree. Alternatively, you can refinance your home as part of your divorce financial arrangements and use the cash to buy one ex-partner’s home equity.

Can a married couple take out a joint home equity loan?

Married couples can take out joint home equity loans as co-borrowers, though they’ll each need to meet the lender’s approval requirements. Couples who share a joint home equity loan also share legal responsibility to repay the debt. If one spouse has poor credit, it could make sense for the other spouse to get a home equity loan in their name only.

Can a spouse get a home equity loan without consent?

It’s very difficult for one spouse to get a home equity loan without the consent of the other because the house that secures the loan is regarded as joint property even if there’s only one name on the mortgage.