Family Matters: Discussing Home Equity with your Spouse

Homer Simpson once made a huge financial decision -- taking out a home mortgage -- without consulting his wife, Marge. This scenario parallels the lives of many non-cartoon couples, as well. A recent survey by American Express, in fact, discovered that 91 percent of Americans find reasons to avoid talking about money with their partners.

When it comes to using home equity, this could be a recipe for disaster. Marriages are made up of two individuals, and each one has different goals and dreams that tapping home equity can facilitate. Because a decision like this has long-term financial ramifications, it’s important that the lines of communication be open. Both parties must be involved in the decisions and the responsibilities that come with it.

Home equity talking points

If you have accumulated equity in your property, you can borrow against it to finance your dreams through a mortgage refinance, a home equity loan, or a home equity line of credit (HELOC). But what if your goals are different? The family chef may be dreaming about a kitchen remodel, while the spouse may be visualizing the purchase of a lakeside cottage to create family vacation memories. What’s a couple to do?

(1) Open the lines of communication.  Change the patterns of the one in three couples who say that finances cause the most stress in their relationship. Make an appointment to sit down with your spouse and discuss how you can tap into your home equity to get the money to finance your pet projects. Each person should share his or her thoughts on how the money would best be spent, free from judgment by the spouse.  Then, together, you can decide which path will most successfully lead to your ultimate goal -- bringing happiness to the family.

(2) Choose a researcher.  Once you determine your goals, decide who will be responsible for making the next move. Step one is to discover how much equity you have in your home, and do a little research into the various ways of tapping it. The three possible choices are mortgage refinance, home equity loan, or HELOC.  Make a date to get together once the research is completed to review your alternatives. Once you have all the information in front of you, jointly make a decision.

(3) Select a leader. Once you know which financial instrument you want to go for, choose a person to lead the process. This will include contacting a bank, filling out the application, gather all the paperwork, and staying on top of the process.
   
(4) Acknowledgement and celebration. Don’t forget to appreciate your spouse for all the hard work he or she does. Then, once you close on your loan, make sure you celebrate your success.

Homer’s independent financial move created conditions that led to a possible marital break-up. Don’t make the same mistake by avoiding the all-important discussion of financial matters with your spouse. Then, like Homer and Marge, you can live happily ever after in an animated way, and never worry about being cancelled.