How to Get Out of Your Joint Mortgage

How to Get Out of Your Joint Mortgage

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FAQs About A Joint Home Loan

Can three people be on a mortgage?

There is no legal limit to how many people can be on a mortgage, but your lender may have restrictions in place. Remember that everyone on the loan also has to be able to qualify for it to be approved, and some lenders may see a big group of names as a potential risk.

Even if multiple people aren’t on a loan, keep in mind multiple parties can still own a property through joint tenancy or tenancy in common.

Can a joint mortgage be transferred to one person?

A mortgage can technically be transferred to one person via a refinance. For this to happen, you will either need to refinance to a sole ownership loan or, if your partner will not agree to it, a cash-out refinance that will give them their equity in exchange for the title of the house.

Can an unmarried couple buy a house together?

Yes, an unmarried couple can buy a house together. You don’t have to be married to another person to buy a house with them or get a joint mortgage. However, there are some factors to consider when buying a home as an unmarried couple that you’ll want to research to make sure you’re getting the best deal when applying individually or for a joint mortgage.

In a joint mortgage, what happens if one borrower dies?

If a co-borrower dies, then responsibility for the mortgage payment falls to the surviving borrower(s). If the deceased party had their name on the home’s title, partial ownership could potentially pass to a family member or heir through a will – otherwise, probate court will determine what happens to the deceased party’s share of the title.

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Pros Of A Joint Mortgage Loan

So, why would you want to get a joint mortgage loan over a loan with just your name on it? Here are a few of the benefits that come along with getting a joint home loan.

More Housing Options

With a joint mortgage, you get the chance to pool your income with another person’s. This can potentially give you the opportunity to pursue homes that would otherwise be out of your individual price range, not to mention you’ll likely be able to qualify for a larger loan.

Tax Benefits

As with most mortgage loans, you can typically deduct joint mortgage interest – and some other fees – when filing taxes. Typically, the person who actually paid the interest (and property taxes) is the one entitled to deduct the expenses on their report. If both you and your spouse or co-borrower paid a share of the interest or taxes, you will want to attach an explanation of that and how much you each paid to your return.

How to transfer a mortgage

If you both decide you want the mortgage to be transferred to one person, you do this through a legal process known as a ‘transfer of equity’. 

A transfer of equity is when you transfer a joint mortgage to one of the owners, or to a new person. The ‘Equity’ you have in a property just means how much of the property you legally own. It’s the amount you’ve paid in through your mortgage repayments. 

Your marital status doesn’t affect your ability to transfer a mortgage to one person. Whether you’re married, divorced or cohabiting, lenders treat your situation the same. Anyone who is named on a mortgage is responsible for paying it off, regardless of whether they remain married or not.

When you transfer a mortgage to one person, you can either stick with your current lender, or consider looking around for a new lender. 

It’s important to speak to your current lender as soon as you can. Lenders have different criteria when it comes to transferring the mortgage ownership to one person. They’ll want to know the person can afford to pay the full monthly mortgage payments. It’s good to know what you’ll have to do up front before you commit to it. If you’re not happy with what your current lender is asking, you can consider remortgaging with a new lender. 

The process of transferring a mortgage to one person usually involves an interview and consultation with a solicitor, and you might have to have your property revalued. There’s likely to be admin and legal fees, and possibly stamp duty if you’re making a substantial payment to the other joint owner.

If you decide that you’d like to buy out your partner but don’t want to live in the house anymore, then you have the option of keeping ownership of the property and renting it out. Or you could remortgage the property and use the equity to help buy a new home.

Limitations of a Divorce Decree

If your quest to remove one name from a joint mortgage stems from a divorce, be sure you understand just how little that impacts your lender. Even if the court order specifies that one spouse gets the house and the other gets off the mortgage, this only controls the actions of the two parties. It does not mandate that the lender alter a private contract involving the two of you.

Likewise, some people think that a quitclaim deed transfer eliminates a party from the mortgage too. This isn’t true. Removing a name from the property deed has no impact on the mortgage contract. To get one name off the mortgage, you must deal directly with the lender.

Can you take a name off the mortgage without refinancing?

It may be possible to take a person’s name off your mortgage documents without refinancing. Ask your lender about loan assumption and loan modification.

Either strategy can be used to remove a former co-owner’s name from the mortgage. But not all lenders allow assumption or loan modification, so you’ll have to negotiate with yours.

If neither is allowed, a refinance may be your best and only bet.

Loan assumption

In theory, loan assumption is the simplest solution of all.

You inform your lender that you are taking over the mortgage and you want a loan assumption. Under a loan assumption, you take full responsibility for the mortgage and remove your ex from the note.

The terms and interest rate on the existing loan remain the same. The only difference is that you are now the sole borrower. (And if your ex is the one who gets the house, your credit and finances are protected if your former spouse fails to make payments.)

Be sure to ask the lender if you can obtain a release of liability. This will eliminate your obligation to repay the loan if your ex fails to.

The problem here is that many lenders won’t agree to a loan assumption. And lenders that do agree may demand evidence that the remaining borrower can afford the payments.

Your ex may have to consent to the assumption, and you may need to submit a divorce decree.

In addition, a loan assumption isn’t free. It can cost one percent of the loan amount, plus administrative fees of $250 to $500.

Loan modification

Loan modification allows you to change the terms of your mortgage loan without refinancing. A loan modification is typically used to lower the borrower’s interest rate or extend their repayment period to make the loan more affordable.

Typically, modification is only allowed in cases of financial hardship. But some lenders may accept divorce or legal separation as a reason for loan modification.

Call your lender or loan servicer to ask whether modification is an option for removing a name from your mortgage.

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Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.

Joint mortgage requirements

The process of applying and qualifying for a joint mortgage contains several steps that all borrowers on a joint home loan will need to complete.

Collect your financial paperwork. You’ll need all the necessary paperwork showing your personal information, assets, employment information and income. This includes W2 or 1099 forms, tax returns, bank statements and retirement and/or investment account statements. If you’ve been divorced, pay or receive child support or have filed for bankruptcy, you should also provide statements to that effect.

Make sure you meet all the minimum mortgage requirements for a joint mortgage. Lenders will examine your income and debt to determine your debt-to-income (DTI) ratio — ideally, they’ll want to see a DTI ratio of no more than 43% — and also look at your credit score to see if it meets the minimum required by the loan type. In addition, lenders will want to know how much you plan to pay for your down payment and closing costs. Finally, they will review the loan-to-value (LTV) ratio for the home you plan to buy. This affects several loan terms, including the loan amount, interest rate and monthly payment.

Determine how much you want to spend on your joint mortgage. This goes beyond how much you qualify for on a joint home loan. Your lender may quote you a monthly payment that sounds affordable for your budget, but you’ll need to evaluate this cost with your other regular monthly expenses, such as groceries, gas, utilities, childcare costs and car or student loan payments. You want to have a payment you can comfortably pay each month.

Decide which joint mortgage loan is right for your needs. There are several mortgage programs, each with their own requirements and loan terms. It’s important to review each one to find the right joint mortgage for you and your co-borrower(s).

Choose a mortgage lender that best serves your needs. Today’s borrowers no longer have to rely on the bank up the street for a joint mortgage. Although these can still be a good source of a joint home loan, a mortgage banker or broker also could offer a favorable mortgage for you. Many online lenders also have access to good mortgage products that could be right for you. Take the time to research several of these to find the right fit.

Fill out your joint mortgage application. Once you’ve done your research and have all your documentation ready, you and your co-borrower are ready to start the paperwork. Many lenders allow you to complete a mortgage application online or even over the phone. Of course, you can still go old-school and complete a mortgage application in-person with your lender.

4) Partition the Property

Finally, after all other options have been exhausted and you just want your name off this mortgage, there is one last option to finally remove yourself from the mortgage: a partition action. A partition action is a court order forcing the sale or division of shared property. A partition by sale would force the shared property to be sold, thereby allowing you to unlock the full value of your share of the home. Your co-owner would also receive their fair share of the equity.

Allowing a co-borrower to remain in a home that he or she cannot afford while your name remains on the mortgage isn’t benefitting either side. Your co-borrower may be clinging to the property by refusing to let you off the mortgage, but the reality is that the home is well beyond his or her means. Hence, the reason a lender won’t give them a new mortgage on the property without another borrower. Living in a home that one cannot afford causes undue financial stress, especially when it’s possible to sell the home and move somewhere that fits this person’s income range.

Furthermore, depending on how much time has passed and the condition of the real estate, the property value may have gone up significantly. You are entitled to use or get the value from your portion of the real estate. A partition action allows you to do just this, even if your co-borrower insists on keeping the property. In fact, your co-borrower has the right to purchase the property from the partition sale. This allows you to get off the mortgage and give up any interest in the property while allowing your co-owner to remain the property.

If you are ready to end this one-way relationship for good, contacting a knowledgeable partition attorney to force a partition action is the only way to forcefully remove yourself from a mortgage. Indeed, California law allows for a forced sale of a property through a partition action despite the roadblocks your co-borrower may try to put up.

Quitclaim Deeds

With a quitclaim deed, the owner passes the title of a home to someone else, for legal or other reasons. This kind of deed does not remove someone’s name from a mortgage; all rights of ownership are transferred, but loan contracts remain unchanged, and the person who first signed the loan still owes that debt. As a result, a quitclaim deed can leave a borrower worse off than they were before—they owe money on a house, but they no longer have any claim to it as its owner.

Giving up your status as an owner does not mean you give up the responsibility to pay your debt.

FAQ on removing your name from a mortgage

How can I get out of a joint mortgage?

Refinancing will pay off the joint mortgage and replace it with a new loan that’s in your name only. You’ll have to qualify for the new loan using your own income and credit history. You could also sell the home to pay off the joint mortgage. In some cases, your loan servicer may be willing to modify the loan to remove a co-borrower or let you assume the loan for a fee, but this is far less common.

Can I remove my name from a mortgage?

To remove your own name from a mortgage, you and your co-borrower can ask the lender for an assumption or modification that would remove your name from the loan. If the lender won’t change the existing loan, your co-borrower will need to refinance the home into a new mortgage.

Does it cost to remove a name from a mortgage?

Yes. Refinancing to remove a name requires closing costs which typically range from 2% to 5% of the loan balance. A loan assumption usually requires a fee of about 1% of the loan amount plus processing fees. A loan modification’s cost will depend on your lender.

Can I remove someone’s name from a mortgage without refinancing? A loan assumption or a loan modification could release a co-borrower from your mortgage without refinancing into a new loan. However, lenders aren’t required to grant assumptions or modifications, so be willing to negotiate.

2. Add Another Co-Signer

When it comes to removing the name from a joint mortgage, one of the options is to find a replacement/co-borrower. This will be completed through a refinance and both co-borrower and you will need to qualify again for the new loan to pay off the existing loan. This is can be completed by refinancing and the new co-borrower can be considered a “non-occupant” co-signer meaning they are not going to occupy/live in the property. Many times we see parents act as “co-signers” for their children to assist them with qualifying. 

Getting Help

Removing a spouse name from a mortgage loan can be complicated, and you might need legal help to get it done right. In many divorces, the family home is by far the largest asset, so it’s important to make sure you handle this step correctly. An experienced attorney can help you deal with the bank and meet any other legal requirements to have your spouse removed from the mortgage and deed, and get your house in your name alone.

How to Get Out of a Joint Mortgage: 4 Options to Consider

There are several different options for getting out of a joint mortgage. Some are easier than others, and the right one for you will depend on your specific circumstances.

While this may be the “cleanest” solution, it will also take some work. Refinancing the loan in your name only will require you to prove to the bank that you have enough income, equity, and credit to handle the mortgage payments on your own. In addition, your ex will have to agree to let you keep the house.

If you’re in a solid financial position, this could be as easy as filling out an application and providing your W2s and bank statements.

Depending on what other assets you’ve gathered together throughout the course of your relationship, you may need to “cash-out” your ex. In other words, you’ll have to give him or her 50% of the equity of the home in cash in order for them to agree to have their name removed from the title.

If you have enough equity in the home, then you may be approved for a cash-out refinance. Once approved, you’ll take the cash you received and use it to pay your ex. If this isn’t an option, you could also consider a personal loan.

Note that after this is all completed, you’ll also want to get your spouse’s name off the deed. This is usually done using a form known as a “quitclaim deed.” This is a legal document stating that the individual gives up all legal rights to the property.

When dealing with legal documents like this, it’s always a good idea to work with an attorney so you can make sure everything is done correctly.

A much easier option may be to simply sell the house and split the profits with your ex. Of course, this assumes that there’s currently a market for the home and that you don’t owe more than it’s worth.

Once you sell the home, the mortgage is paid off and you no longer have to worry about the joint liability. You’ll each take your share of what’s left and walk away.

If your home is “underwater” (meaning you owe more on the mortgage than you can sell it for) then you might have to consider a short sale. There are some pretty significant drawbacks to this, so you’ll want to discuss it with a financial advisor and/or attorney before you move forward.

A third option is to apply for a loan assumption. This simply involves informing your lender that you’re taking over the mortgage and you would like your ex removed. In this case, all of the loan terms would stay the same, with the only difference being that you’re now listed as the sole borrower.

However, many mortgage lenders won’t agree to this. At a minimum, they’ll probably require you to prove that you’re in a position to take over the payments on your own.

If they do agree, there’s usually also a charge for this service. On average, you can expect to pay one percent of the loan amount, plus a $250 to $500 administrative fee.

The fourth option will only work if you have a VA or FHA-backed mortgage. An FHA streamline refinance is ideal if you have acquired the home and the FHA loan more than six months ago and have made at least six payments by yourself.

In this case, you can often get approved without a new appraisal and without submitting documentation to requalify. If it’s been less than six months or you haven’t made six payments on your own, you may need to resubmit income verification.

VA streamline refinance works almost the same way. Generally, the person who remains on the mortgage must be an eligible veteran.

4. File For Bankruptcy

For those who are struggling to pay off the mortgage and want to remove their name, the last resort is to file for bankruptcy. Filing for bankruptcy gives people the eligibility of a bankruptcy discharge under Chapter 7 of the U.S. Bankruptcy Code. The process involves including the mortgage under a bankruptcy filing form and if the proceedings go as planned, the liability of the mortgage will rest entirely on the co-borrower.

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Who can apply for a joint mortgage?

While most borrowers can apply for a joint mortgage, married couples are the most common borrowers of a joint mortgage. Couples in committed relationships also often apply for a joint mortgage. Because young adults often haven’t yet established a strong or long credit history, or may not have sufficient income to qualify on their own, they may opt to apply for a joint mortgage with their parents. Close friends or siblings also may choose a joint mortgage, because it could be more affordable than buying or renting alone.

In most cases, joint mortgages involve two borrowers. However, depending on your lender, you may be able to have more than two. It’s important to talk with your lender to find out what the limitations are for the number of borrowers on a joint mortgage.

2) Refinance the Mortgage on the Property

The next solution to removing oneself from a joint mortgage loan is to refinance the mortgage under a single owner-borrower. Refinancing a mortgage allows a co-mortgage borrower to apply for a new home loan to pay off an existing mortgage. Usually, this will be a cash out refinance to pay out the co-owner who is selling their interest in the property to their fellow co-owner. By removing yourself from the mortgage via a refinancing, you are also removing yourself from any joint and several liability for the loan and will therefore not be liable for repayment of this loan.

However, your co-borrower must have acceptable credit, debt to income ratio, equity, and income as well as your consent in order to refinance. This is process is similar to that of the original loan approval process. Again, the new lender may be leery of a refinance only by a co-borrower, especially if the remaining co-borrow may not be able to make payments on the loan.

Can I co-sign a mortgage if I already have one?

You may not need to get your name off of an old mortgage to co-sign for a new one. There isn't a rule about how many mortgages you can have at once, but it depends on how the lender views your credit history and income. A high-income individual with good credit is more likely to be approved as a co-signer than someone with bad credit and less income.

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