Can Unmarried Co-Owners Take Out a Joint Home Equity Loan?

Yes, but it may not always be wise to do so

Fact checked by Melody Kazel
Reviewed by Lea D. Uradu

Home equity loans are designed to allow property holders to borrow against their home equity to meet their financial needs. Two people who own a home together but are not married can take out a home equity loan jointly, assuming that they’re each able to get approved by the lender. If a co-owner would prefer not to be added to the loan, the other homeowner can still apply with some stipulations.

Key Takeaways

• Home equity loans are second mortgages that allow homeowners to tap into their equity by using their home as collateral.
• Unmarried co-owners of a home can take out a joint home equity loan together, but they’ll both need to meet the lender’s approval requirements.
• It could make sense for just one co-owner to apply for the home equity loan if they have a better credit profile.
• Should just one co-owner apply for a home equity loan, the other co-owner may be required to give their consent before the loan can be approved.

What Is a Home Equity Loan?

A home equity loan is a second mortgage taken out against a property’s equity, which represents the difference between what a homeowner owes on the home and the property’s fair market value. Home equity loans generally have fixed interest rates and are repaid over a set term, similar to how a first mortgage loan works.

Lenders can have different requirements that borrowers need to meet to get a home equity loan. Generally, they consider these factors:

• Amount of home equity
• Credit score and credit history
• Income
• Debt-to-income (DTI) ratio

Lenders usually limit you to borrowing 80% of your equity, though some may allow you to borrow up to as high as 90%.

Home equity loans are not the same as a home equity line of credit (HELOC). With a home equity loan, you’re getting a lump sum of money that you can use for any purpose, including debt consolidation, home improvements, medical bills, and vacations and weddings. A HELOC is a revolving line of credit that you can borrow against as needed. HELOCs usually have variable interest rates.

Important

Defaulting on a home equity loan could prompt the lender to initiate a foreclosure proceeding, which could mean losing the home.

Co-Signers and Home Equity Loans

Home equity loans can be taken out in the name of just one person or can have co-signers, who are people who take responsibility for repaying a loan alongside the borrower. All co-signers would be held responsible for the remaining balance on a home equity loan if the primary borrower defaulted.

Unmarried couples who own a home together could take out a home equity loan with each one listed as a co-signer or co-borrower. The same is true for people who co-own a home but are not a couple. For example, someone might choose to buy a home with a roommate or have their parent co-sign on their loan.

Whether you can get approved for a joint home equity loan when you’re not married depends on your individual creditworthiness. Lenders will look at the credit history and score, income, and debts of both co-signers to determine whether to approve the loan. If one co-owner has poor credit, that could make it more difficult to be approved or qualify for the lowest interest rates.

Warning

Co-signing for a first or second mortgage loan does not automatically guarantee that you’ll be added to the home’s deed or title.

Do Co-Owners Have to Co-Sign a Home Equity Loan?

A co-owner of a property does not necessarily have to sign on the home equity loan if the other owner is able to get approved individually. This may be preferable in situations where one co-owner would rather not be listed on the loan. For instance, if your parent helped you to buy your home and is already a co-borrower on the first mortgage, they may not want to shoulder any responsibility for additional debt relating to the home.

This doesn’t mean, however, that one co-owner can take out a home equity loan without the consent of the other co-owner. In fact, the lender may require the other owner’s consent or approval before the loan can be completed. This is common in situations in which one spouse wants to get a home equity loan in their name only. The person whose name is not on the loan is typically required to sign paperwork that would allow the lender to move ahead with a foreclosure proceeding in the event that the borrower defaults. This precludes the possibility of any legal challenges to a foreclosure.

Comparing home equity loan interest rates and terms online can help you find the right mortgage lender for you.

Can You Get a Joint Loan Without Being Married?

Lenders can’t deny you a loan based simply on your marital status, and they have to treat unmarried couples or co-borrowers the same as those who are married. There are certain situations in which it makes sense to have a co-signer or a co-borrower on a loan. If you have a lower credit score, for example, adding a co-signer or a co-borrower could make it easier to be approved at favorable rates.

Can Two People Be on a Mortgage if They Are Not Married?

It’s possible to apply for a first or second mortgage loan as a couple even if you’re not married. Lenders will check the creditworthiness of both borrowers, including their credit scores, incomes, and debts, to ensure that they have the ability to repay what they borrow. Two names can also be on a mortgage in situations in which one borrower needs a parent or other relative to co-sign for the loan.

Can I Have a Co-Signer on My Home Equity Loan?

Lenders can allow co-signers on a home equity loan, and in some instances, it may be to your advantage to have someone co-sign. If that person has a strong credit score, low debt, and steady income, it could help to offset any shortcomings in your own credit history. Keep in mind, however, that the co-signer becomes equally responsible for the debt, and it will show up on their credit history. If you default on payments, that could hurt both your credit score and theirs.

Can a Parent Co-Sign a Home Equity Line of Credit (HELOC)?

A parent can act as a co-signer for a home equity line of credit (HELOC). Co-signing makes them jointly responsible for the debt, though it does not mean that they are automatically added to the home’s deed or title.

The Bottom Line

Home equity loans can be a convenient source of funding when you need cash for different financial goals. If you co-own a home with someone to whom you’re not married, it’s important to discuss whether it makes sense to apply for a home equity loan together. Talking to a mortgage expert can help you understand which rights and responsibilities apply when taking out a home equity loan with or without the property’s co-owner. It can also help you weigh the pros and cons of getting a joint or individual home equity loan.