Like many married couples who divorce, you may be facing the issue of removing your ex’s name from the mortgage on the home you used to own together before you divorced. If your possession of the marital home has been negotiated as part of the divorce settlement, your ex undoubtedly wants his or her name removed as soon as possible so they are not responsible for the debt. However, this can sometimes prove to be a bit of a challenge.
When you applied jointly for a mortgage, the lender used the credit scores and income of both of you to approve the loan. A joint mortgage loan does not mean that each borrower is only responsible for half the loan. It means that you are both 100% responsible for the entire debt. So if one borrower stops paying, the other borrower still needs to keep up the payments or pay off the loan.
Lenders are typically reluctant to let one borrower off the hook because it increases their risk. And even if your divorce agreement stipulates that one of you is responsible for the debt, the lender still has the legal right to collect from both of you under the original loan agreement.
That said, there are still a few options for removing an ex’s name from the mortgage following a divorce, including:
Talk to your lender about changing the loan. Ask if it is possible to keep your original loan without the other borrower. If so, you will need to re-qualify on your own, which means that you will need sufficient income and a good credit score. If you do qualify, the lender will generally provide a release of liability and remove your ex from the mortgage.
Refinance. This is typically the best solution for a clean break. The person who is keeping the house applies for a new loan, uses it to pay off the old loan, and then has a mortgage loan in his or her name only. You will need to qualify individually, so will need the requisite income and credit score. Check out an FHA loan program, which can have lower approval standards for down payments and credit scores.
Assumption. You may be able to transfer a mortgage to another borrower if you have an assumable mortgage (usually an FHA or VA loan). Ask your lender about this option.
Quit claim deed. A quit claim deed will remove your ex’s name from the property title, but will not remove his or her responsibility for paying the mortgage if they are named on the mortgage note. Your divorce agreement should include a refinancing provision if liability for the mortgage is being transferred to just one spouse alone.
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