A: Having “overextended” credit, as you put it, your fiancée may well be paying a higher rate of interest on her current mortgage than someone with a very good credit rating. Assuming that you qualify for a preferred rate, refinancing your fiancée’s home in your name, or in both your names, could help reduce borrowing costs. But there are several factors to consider.
Lenders view a mortgage applicant with many debt obligations -- be they outstanding credit card balances, automobile payments, personal loans or lines of credit -- as more of a risk. A borrower with a credit score below 620 may be charged a higher mortgage rate. If your score is significantly better than your fiancée’s, you may be able to get a better rate on the mortgage.
In order to do this, however, you must have the title on the property transferred from her name into either both your names, or yours alone. This can be done as a normal part of a refinancing process. But there are many legal and tax ramifications. For example, if the title is shifted to both your names, you’ll be considered co-owners. If it’s switched to your name only, you’ll become the sole homeowner. This may not sit well with your fiancée.
As well, the specific regulations concerned with such a switch are dependent on state law. It’s therefore important to contact a real estate attorney in the jurisdiction in which your fiancée’s home is located before making a decision.
Another alternative would be for you to help your fiancée take steps to improve her credit rating. She may then be able to qualify for a reduced mortgage rate in her own name.
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