Regardless of how tough you are, divorce can be an emotionally draining and logistically challenging process. And one of the many important aspects to consider is what happens to your joint home mortgage loan, the loan you used to purchase or maintain your home.
When a couple decides to end their union, they often face the question of whether it’s possible to remove a spouse from the mortgage, and other questions such as who is responsible for the loan and what legal rights each partner has come into play as well.
We’ll share the various options and legal considerations involved in removing a spouse from a mortgage and provide you with valuable insights to guide you through this complex yet common situation.
Removing Spouse From Mortgage After Divorce
If you and your ex-spouse have an existing mortgage together and you want to remove your spouse’s name from it, there are a few possible courses of action.
Refinance the Mortgage
One common approach is refinancing the mortgage in your name alone. Refinancing a mortgage means obtaining a new loan to replace your current mortgage.
The new agreement “pays off” the balance of the original loan, thus enabling you to establish a new loan with different, usually better terms, such as a new interest rate, loan duration, monthly payment amount, or, in this case, only your name.
This process effectively removes your ex-spouse as a borrower.
However, to qualify for refinancing, you’ll need to meet the lender’s requirements, including having a good credit history, enough income to support the new loan, and a favorable debt-to-income ratio.
Additionally, if you remove a borrower from the property’s listed name, it won’t change how the house is titled. However, if your ex has a lower credit score, it will effectively remove their score from rate pricing, which is another potential benefit.
Alternatively, if your ex-spouse has a high credit score and high income that would be eligible for refinancing and you don’t, then you might not be able to remove their name in this way.
Pay Off The Loan Fully
If refinancing isn’t an option for you or you are ineligible, you might consider paying off the loan amount entirely to be able to remove your ex-spouse’s name.
However, if your former spouse is also the homebuyer and co-borrower for the home loan and, for any reason, wants to keep the home, you’ll need to work this out with each other, perhaps with the support of a divorce lawyer.
And if you’re in agreement with paying off the loan but don’t have enough liquid cash to do so, you might need to consider putting the home up for sale to be able to pay off the loan’s remaining balance.
Another option is to negotiate with your ex-spouse and the mortgage lender to have your ex-spouse’s name removed through a release of liability. This approach involves demonstrating to the lender that you can comfortably afford the mortgage payments on your own.
It’s important to note that the mortgage lender is under no obligation to release your ex-spouse from repaying the mortgage rate unless you meet their criteria. And, of course, your ex-spouse has to be amenable to this suggestion.
Again, consulting with a divorce attorney or a realtor experienced in handling divorcing couples can provide you with valuable guidance during any type of financial negotiation.
File For Bankruptcy
Another potential solution, albeit a worst-case scenario, is to file for bankruptcy. When filing for bankruptcy, the court will generally force creditors to write off some or all of the debt.
This approach removes your ex-spouse’s name from the loan, but you’ll need to consider the repercussions of filing for bankruptcy in terms of your own credit score and financial future.
What Happens to a Joint Mortgage if You Split From a Partner?
When a couple splits up, and there’s one homebuyer, things can still be messy. But it’s even more complicated when there’s a joint mortgage.
In most cases, both parties remain equally responsible for the mortgage until it is refinanced, paid off, or the property is sold.
That means that if one party stops making payments or defaults on the mortgage, the lender can hold both parties responsible for repaying it in full.
If you and your ex-spouse agree to remove one of your names from the mortgage, this person will have to sign a quitclaim deed, which will effectively transfer their share of the ownership over to the other party.
Can You Stop Paying the Mortgage After Separation
It’s crucial to note that even if you’re separated from your spouse, are getting a divorce, or have already gotten a divorce, you’re still legally obligated to make the mortgage payments.
Failing to do so can have dire consequences, such as late payments appearing on your credit report and potential foreclosure proceedings.
Until the mortgage is resolved through refinancing, the sale of the property, a negotiated agreement that results in a quitclaim deed, or an agreement with the lender, it’s important to continue meeting your mortgage obligations.
Options for Selling/Owning Mortgage After Divorcing
Divorcing couples who jointly own a property and have a mortgage face several options when entering the house-selling process. One possibility is to sell the property and divide the proceeds.
Selling a house when in a divorce is a popular choice because it allows both parties to sever their financial ties and, ultimately, move forward with their lives.
If you’re seeking a convenient way to sell your house, cash home buyers in Oshkosh offer a seamless transaction without the need for traditional financing or lengthy processes.
If selling isn’t an option, one spouse may choose to keep the property by buying out the other spouse’s share, usually through refinancing, loan assumption, or loan modification.
Alternatively, some couples may decide to continue owning the property jointly, especially if there are children involved.
This option requires effective communication, continuous trust, and a concrete agreement outlining clear responsibilities, such as mortgage payments, repairs, and potential future sale terms.
Note on Buying a New House
If you decide to sell your marital home, you might be interested in owning a new home and might want to consider FHA loans.
FHA loans from the Federal Housing Administration offer more flexible qualification requirements and lower down payments, making homeownership accessible to a broader range of borrowers, including divorced couples.
Mortgage Legal Rights During Divorce
Understanding your mortgage legal rights during a divorce is essential to protect your interests.
The divorce decree, otherwise known as the divorce settlement agreement, typically outlines the responsibilities and liabilities of each party regarding the mortgage.
However, it’s important to note that divorce agreements do not supersede the original mortgage agreement with the lender.
If one partner fails to meet its obligations as outlined in the divorce agreement, the lender can still hold both parties responsible for the mortgage.
This is why it’s important to ensure both parties are clear about what their continued responsibilities are or negotiate for one party to take full ownership over the loan term and repayment.
If there’s any disagreement or fighting over the marital home, it’s best not to try and tackle this on your own but get help from a legal professional.
Can Spouses Be Removed From Mortgage Without Permission?
Removing a spouse from a mortgage can be a complex and challenging process, and in general, both spouses must agree to any and all changes in the mortgage, including removing a name from the loan.
However, there are a few extreme, exceptional circumstances where it might be possible to remove a spouse from a mortgage without their permission.
If you were granted a court order to have your ex-partner removed from the title deeds and mortgage loan, then you’ll be able to complete that action without their permission.
Even if the divorce decree explicitly states that one spouse will assume full responsibility for the mortgage, the other partner still typically has to sign it over.
Plus, in either case, the lender might still only allow one of the remaining spouses to assume the loan if they meet the necessary financial criteria and can demonstrate the ability to make the mortgage payments independently.
Another possibility is if the divorcing couple decides to sell the property and use the sale proceeds to pay off the mortgage. In this situation, both spouses would be released from the mortgage upon the sale of the home, even if they don’t explicitly “agree” to get removed from the mortgage itself.
As mentioned earlier, it’s important to remember that seeking legal advice from a divorce attorney is crucial when navigating these complex matters.
They can guide you through this process, help you understand your legal rights, and provide you with the best course of tailored action.
Divorce is often a challenging experience, even when done amicably, and dealing with the joint mortgage rate adds an additional layer of complexity.
While removing a spouse from a mortgage after divorce is possible, it requires careful consideration, negotiation, and sometimes legal intervention.
You have various options, such as refinancing it, negotiating a release of liability, or selling your house. However, each of these options comes with its own set of requirements and considerations.
It’s crucial to consult with professionals such as licensed mortgage professionals from the NMLS, divorce attorneys, and real estate agents to explore the best approach for your situation.
Remember that maintaining open communication with your ex-spouse throughout this process is also vital. Clear agreements and an understanding of your financial obligations will help ensure a smoother transition and protect both parties’ interests.