Mrs Jayne Hewett faced losing her home because she could not afford to pay after she divorced and the mortgage company won a repossession order.
Mr Justice Briggs, giving the ruling of the three appeal judges, said Mr Hewett "was guilty of a deliberate concealment of the affair, well knowing that its disclosure would have significantly undermined his prospects of obtaining his wife's consent to his proposal" for a joint re-mortgage to pay his debts.
He allowed her appeal over repossession, saying that concealing his affair from his wife amounted to using undue influence to get her to sign the deal.
First Plus Financial Group can still make a charge on Mr Hewett's interest in the property which gives them the right to apply for a possession order.
Whether and when they are entitled to enforce it will be remitted to Norwich County Court.
Mrs Hewett bought out her former husband's interest in Colomb Road, Gorleston, Norfolk, when he was made bankrupt.
John Cushing of Hatch Brenner solicitors who acted for Mrs Hewett said they would be negotiating with First Plus to try to resolve this point.
Mr Cushing said that it was a fantastic result for his client.
"Mrs Hewett is extremely relieved at the outcome after more then five years of stress and worry not knowing if she was going to lose her family home through no fault of her own."
Mr and Mrs Hewett married in 1991 and have two children. By 1999 Mr Hewett was in debt because of overspending on credit cards, said the judge, and the couple, together with Mrs Hewett's mother, bought a home for all the family for £51,000.
In 2002 the property was remortgaged to cover the cost of extensions and pay off more debts run up by the husband.
"By the end of 2003 Mr Hewett's credit card debts had substantially increased again and, but unknown to Mrs Hewett, he had started an affair."
At the time of the remortgage in 2004, Mrs Hewett believed she was in a "happy, stable relationship", said the judge.
"Mr Hewett recognised that he and his family faced the loss of their home if his debts could not be re-financed on a secured basis, so as to reduce the overall interest burden to a level within the family's means," said Mr Justice Briggs.
He said Mrs Hewett refused to sign the mortgage deal at first, because she was unwilling to risk the family home.
"She was told by her husband that a charge on the property was the only way to rescue the family from its plight, and eventually decided to accede to her husband's request."
She said she was told it was the only way to keep the house - "a horrible choice".
The husband was convicted of forging the name of his mother-in-law on the mortgage form because he feared she would cause difficulties, said the judge.
Mrs Hewett found out about the affair in May 2004 and in January 2005 her husband moved out and they were divorced in 2006.
The same year he lost his job and was made bankrupt with debts including a further £40,000 on credit cards.
She bought out his share in the property for £1 but found it impossible to maintain the instalments to First Plus and possessions proceedings began in 2008.
A county court judge granted the mortgage company possession.
This judge found that although Mrs Hewett faced a "horrible choice", she made up her own mind to join in the remortgage without oppression, bullying or threats.
Mr Justice Briggs said: "It is evident that Mrs Hewett's decision to accede to her husband's request was based upon an assumption on her part that he was as committed as she was to the marriage, to the family and to the preservation of their home life in the future.
"The truth was that he had already embarked upon an affair which, although by no means a certainty, carried with it the serious risk that it would lead in due course to Mr Hewett's departure from the family and withdrawal of both emotional and financial support, as eventually occurred.
"On that analysis of the decision facing Mrs Hewett, I consider that Mr Hewett's affair cried out for disclosure."
The result was, said the judge, that he would set aside the mortgage on which First Plus bases its claim.
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