If you’re pondering about taking someone’s name off a mortgage, a significant life event is likely unfolding. There are many reasons why you might want to change the name on your mortgage. This could include getting a divorce, splitting up with a partner, or just wanting to give the other person more financial flexibility. But the circumstances are different now than when you first got the mortgage.
Having a co-signer in a mortgage can be helpful. This is because you can use two incomes to find out how much money you can borrow and/or use the credit scores of two people to get a lower interest rate.
When you originally took out the mortgage, it made sense. But now, life has changed and you need to remove someone from the mortgage agreement. Though it’s not simple, here are a few steps that will assist you in getting it done attorneys recommend.
You and your co-borrower may ask the lender for an assumption or modification to remove your name from the mortgage. If the lender refuses to modify the existing loan, your co-borrower will need to refinance the property into a new mortgage.
How do I get my name taken off a mortgage?
Lenders are hesitant to remove a borrower’s name from a mortgage. The loan was approved based on each person’s credit score and two sources of income at first.
The fact that both borrowers had a joint income was a major deciding factor in whether or not the bank offered them a home loan.
If you want to get rid of a co-borrower, then it could be beneficial to seek a replacement for the co-borrower who would be assigned the rights and obligations of the mortgage.
Can you remove someone’s name from a mortgage without refinancing?
It’s possible to get a person’s name off of your mortgage without refinancing them. You can get a former co-owner’s name off of the mortgage using either loan assumption or loan modification. Speak to your lender about which strategy would be best for you. Meanwhile, read about four possible solutions.
Loan assumption as a solution
Theoretically, loan assumption is the easiest solution. You contact your lender and let them know you will be taking over the mortgage payments and assuming full responsibility for the debt. This removes your co-borrowerfrom any future obligation regarding the payment of this debt.
The difficulty is that many lenders will refuse to consider a loan assumption. Loans that do accept you may ask for proof that the remaining borrower can afford the payments. Your co-borrower may be required to sign off on the assumption.
Keep in mind that a loan assumption may cost you some money. One percent of the loan amount, plus administrative fees ranging from $250 to $500.
Loan modification to avoid refinancing
A loan modification is an act of changing the terms of your mortgage loan, achieved without having to refinance.
A mortgage loan modification is a technique to lower the borrower’s interest rate or extend their repayment period to make the debt more manageable.
Generally, modification is only possible if you’re experiencing financial difficulties. Nevertheless, some lenders might accept divorce or legal separation as proper justification for a loan modification.
You have the authority to remove names from your mortgage by either contacting your lender or servicer and inquiring about modification, or working with a mortgage lawyer.
Sell your house
If neither borrower can pay the mortgage on their own, the only alternative may be to sell the property.
In many areas of the nation, there is presently a strong seller’s market because housing has been in short supply for some time. Thus, homeowners may be able to get a great offer on their property.
A “short sale” is a property sale in which the net proceeds don’t cover all the liens on the property. This may become necessary if your mortgage debt exceeds the value of your home.
On the other hand, if real estate prices have decreased rather than increased, selling your home could pose more of a challenge — especially if you bought it recently and made only the minimum down payment.
If your mortgage lender sells your house in foreclosure, they can sue you for the deficiency which is the difference between what was owed on the mortgage and what the property sold for. In many cases though, lenders do not pursue the borrowers for this balance.
Although if the mortgage lender does release the borrower from this liability, their credit score as well as their spouse’s will be impacted negatively by a short sale.
Keep the mortgage
Both of you could agree to pay the mortgage. This may work, especially if both people choose to stay in the home. As a result, both individuals have an incentive to keep up with the payments.
However, if you stop making payments, the house could go into foreclosure and your credit score will plummet. If you have to remain joint borrowers with your co-borrower, talk to a lawyer first. A lawyer may be able to help safeguard your finances if your former partner stops paying.
Do I need an attorney to remove my name from a mortgage?
If you are splitting up with your partner and own a property together, you may need a conveyancing solicitor to carry out what is known as a property settlement.
Selling equity, regardless of whether money changes hands, necessitates the changing of paperwork and the deed to your property’s name by an attorney.
It does not necessarily imply that any cash changes hands when one partner’s equity is transferred to another. Couples might decide what value they wish to trade the marital propertyfor themselves.
Equities can also be exchanged for items such as vehicles or housewares. An ex-partner might even agree to have his name removed from the deeds for free.
If a property exchange is being suggested, you should speak with your attorney so that he or she can help you calculate the value of your home’s equity as well as the potential risks involved with such an arrangement.
What happens when you have a joint mortgage and split up?
If you and your partner jointly invest in a mortgage, both of you have an equal say over the property. This means that if you are no longer together, each party still has the right to live there. A joint mortgage also implies that you are equally responsible for your mortgage payments. If you have a joint mortgage with someone, each of you has an equal stake in the property. This implies that if you separate, each of you retains the right to live there. It also means that you are equally liable for repayments on your loan.