You signed a joint mortgage with your spouse or significant other and now you want out. Can you just walk away from the home and tell the lender to take your name off the loan?
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Unfortunately, it’s not that simple. You are legally bound by the mortgage unless you take the proper steps to remove yourself. Keep reading to learn the options you have to get yourself off a joint mortgage.
Release of Liability
This first option is pretty rare, so you’ll have to see if your lender offers this option. It’s most commonly used when there is a divorce. If the legal divorce agreement awards the home to one spouse, the lender may be willing to offer a
release of liability, assuming you qualify for it.
This isn’t a formal refinance, but lenders do have to see if you qualify for the loan. They will run your credit score, look at your income, and compute your debts. They want to make sure beyond a reasonable doubt, that you can afford the loan payments on your own.
If the lender decides you can afford the loan on your own, they may issue a Release of Liability which removes the borrower that wants out from the mortgage obligation.
Refinancing the Mortgage
The more common way to remove someone from a mortgage is to refinance it. This is especially true if you have to buy out the other partner’s equity in the home. In this case, you may need to apply for a cash-out refinance if you don’t have the cash available to pay your ex-partner.
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When you refinance the mortgage, you
don’t have to use the same lender. In fact, we recommend that you apply for the refinance with several lenders. This way you can determine which lender offers the best interest rate, terms, and closing costs.
Just like with the Release of Liability, you will need to be able to qualify for the loan on your own, unless you have another co-borrower willing to go on the loan with you. The lender will look at your credit score, income, assets, and debt ratio to make sure you can afford the loan on your own.
If you are approved, when you close on the loan, you will take title as a sole owner or with the new borrower, if that’s the case.
Selling the Home
If you and your ex-partner can’t come to an agreement or you can’t qualify for the loan on your own, you may have no choice but to sell the home.
This could be the most costly option depending on your situation. First, is there equity in the home? If so, you can likely sell the home and split the equity as you agreed to do with your ex-partner. If you are underwater, it may be more difficult to sell the home.
If you are underwater, you owe more on the mortgage than you could get when you sell the home. This will leave the mortgage underpaid. You have two options in this case – pay the difference to the lender out of your own pocket or request that the lender considers a
short sale agreement. If you can do a short sale, it means that the lender is willing to accept a smaller amount than you owe on the mortgage and they will consider the mortgage ‘paid in full.’
Your best option to get out of a joint mortgage is to refinance. If the partner staying in the home can’t qualify, you’ll have to think about selling the home. You can’t just remove someone from a mortgage and move on – the lender has to think about their liability, which is why they plan an integral role in the process.
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