Buying Property in NY with Two Names on the Deed and one on the Loan
Often times when a husband and wife, or any two people, buy a house together they take ownership together. In New York State, when a husband and wife buy a house together, and the Deed states that they are husband and wife, the law affords them certain protections. An example of how this reads is “John Doe and Jane Doe, as Husband and Wife”. This means that they take ownership as Joint Tenants with Rights of Survivorship, even without those magic words expressly written on the Deed. What this means is that when one spouse dies, the surviving spouse owns the entire house.
This arrangement can be shared by people who are not married as well, but the Deed must state the language expressly. For example, if two people buy a house together and want Joint Tenants with Rights of Survivorship, then the Deed must read “Person A and Person B, as Joint Tenants with Rights of Survivorship”. This means that like the married couple in the example above, when the first person, either Person A or Person B dies, the house belongs entirely to the surviving person.
When obtaining a loan to buy a house, the way that the purchasers take ownership has several implications. When a borrower or borrowers apply for a loan from a bank or lending institution, the bank examines many factors in determining whether they will lend the borrower money. If the loan is approved, the loan becomes secured by the property. In the event that the borrower cannot repay the loan, the bank will take legal actions to sell the house in order to get repaid.
Sometimes you see situations where two people want to own the house, but only one person wants to take out the loan in order to buy the house. This presents several issues for the bank or lending institution. The bank must be certain that their interest is protected, because they are lending a large sum of money. The bank’s ability to sell the property in the event of the default is critical to their model and they will not lend money unless they are protected.
Some families use this for estate planning purposes, since the surviving owner will own the house. Some families end up in this situation if one person has low credit. Sometimes one spouse is unemployed, a student or retired, and their ability to get a loan poses a problem to the purchase.
What banks and lending institutions typically do in this situation, is permit one person to get the loan but with some restrictions. The transaction of getting a loan and buying a house is called a closing. At closing, the bank prepares a stack of documents for the buyers to sign. Among these documents are a Mortgage and a Note. The Mortgage secures the loan to the property, and the Note is the promise to pay. In a transaction where one spouse wants to take the loan out but both spouses want to take ownership, the bank will typically require both spouses on the Deed to sign the Mortgage. Then only the person taking the loan out will sign the Note, the promise to pay. The implication for the non borrowing spouse is that if the loan is not paid or goes into default, then the bank will still have recourse to sell the home to get repaid.
For most, real estate transactions are very personal because you are dealing with someone’s home where they live. First time buyers are especially nervous because this purchase is most likely where they will live and settle down.
Spodek Law Group P.C. will handle your real estate transaction with expertise while holding your hand through each step of the way. Our attorneys will guide you through this process and will do everything possible to make sure the transactions occurs smoothly.
Victoria Spodek is a real estate lawyer with Spodek Law Group P.C.