How to Remove Someone from a Mortgage | No Refinance Option

What to consider before removing someone from a mortgage without refinancing

You’re parting ways with a spouse or co-mortgage borrower. You’ve agreed on who will keep the house and take over the mortgage payments.

However, a challenge remains: how do you remove someone from a mortgage? And can you do so without refinancing? In the eyes of your mortgage lender, those “ties that bind” aren’t legally severed until you remove your ex from the mortgage.

The good news is that you have a few options. The best one is usually to refinance, which may be less of a hassle than you think. But refinancing isn’t the only way. Here’s what you should know.

In this article (Skip to...)

• Removing someone from a mortgage
• Remove a name without refinancing
• Refinancing to remove a name
• Pros and cons
• Remove a name from the deed
• FAQ

Can you remove someone from a mortgage?

Yes, removing someone from a mortgage is possible, but the method depends on several factors including lender policies and the specific circumstances of the mortgage holders.

The most common way to remove someone from a joint mortgage is through refinancing the loan solely in the name of the person who will retain ownership of the property.

The most common way to remove someone from a joint mortgage is through refinancing the loan solely in the name of the person who will retain ownership of the property. This process involves obtaining a new mortgage that pays off the existing one, thereby releasing the other party from their obligation.

What happens if I can’t refinance after a mortgage?

If refinancing isn’t an option due to financial constraints, credit issues, or lender restrictions, there are a few alternative paths you might consider.

• One option is a loan assumption, where one party takes over the full responsibility of the mortgage with the lender’s approval. This is not always available and depends on the original loan terms and lender policies.
• Another option is a loan modification, where the lender agrees to alter the terms of the existing loan to accommodate the change in borrowers.

If both of these options are unavailable, selling the property might be the only solution to remove the obligation from both parties. It’s important to communicate with your lender to explore all available options.

How to remove someone from a mortgage without refinancing

While the best way to remove someone from a mortgage is often with a mortgage refinance, that comes with additional closing costs and the potential challenge of qualifying for a new loan, both of which need careful consideration.

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

Either strategy can 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, you may still have options. If you’re wondering how to remove someone from a mortgage, here’s what you can expect.

Mortgage loan assumption

In theory, mortgage loan assumption is the simplest solution of all. That’s because it doesn’t require refinancing your mortgage.

You inform your lender that you are taking over the mortgage and want a loan assumption. When you assume the mortgage, 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 mortgage lender if you can obtain a release of liability. This will eliminate your obligation to repay the loan if your ex fails to do so.

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 loan assumption, and you may need to submit a divorce decree.

In addition, a loan assumption isn’t free. It can cost 1% of the loan amount plus administrative fees of $250 to $500.

Mortgage loan modification

A 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 a loan modification.

For example, if one party wants to keep the home as part of a divorce agreement, a loan modification may be used to transfer the mortgage into the name of the spouse who will retain the property.

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

Selling the house

If neither borrower can afford the mortgage on their own, the only option may be to sell the home. This would remove both you and your ex from the home loan and provide a fresh start for both of you.

Fortunately, there’s still a strong seller’s market in many parts of the nation, as housing has been in short supply for some time. So it may be possible for home sellers to get a great offer on their property.

However, if real estate prices have fallen instead of rising, selling the home could be much more challenging, especially if you recently bought the home and made the minimum down payment.

If the mortgage is underwater, you may have to opt for a “short sale.” This is a property sale in which the net proceeds don’t fully cover all the liens on the property.

In less fortunate circumstances, your mortgage lender can sue you for the difference between the foreclosure sale proceeds and the remaining loan balance. This is called a “deficiency,” but in many states, mortgage lenders can’t come after you for this. Even if the lender releases you from liability, your credit score and your spouse’s will be negatively impacted by a short sale.

Tax implications of selling the home

Keep in mind that selling the home could create a new tax burden. Proceeds from home sales can be subject to the capital gains tax. Capital gains tax is a levy imposed by the IRS on profits made from the sale of an asset.

You probably won’t owe capital gains tax if you’re selling your primary residence and owned it for at least two years, but you still might if your earnings exceed the specified thresholds:

• Up to $500,000 in profits is tax-exempt for couples filing jointly
• Up to $250,000 in profits is tax-exempt for individual filers

These exemptions won’t apply if you’re selling jointly-owned investment property. In that case, you could owe capital gains taxes on all proceeds from the sale. Your professional tax preparer will know how to report your capital gains to the IRS.

Paying the home loan balance in full

Should you find yourself unable to refinance your existing mortgage, the lender might insist that you fully pay off the loan to take someone’s name off the mortgage. This action will finalize the loan, freeing you, along with any other co-borrowers or co-signers, from the mortgage agreement.

If the amount of debt you carry makes this unworkable and you don’t have immediate access to enough cash to cover the total loan balance, you may find that your only viable alternatives are either mortgage refinancing or selling the property to settle the remaining amount.

A final (risky) option

For those who are still wondering how to remove someone from a mortgage without refinancing, there is one final option. But it’s risky and should only be used as a last resort.

You and your ex can agree to both stay on the mortgage.

This could work, especially if both people decide to continue living in the house. That way, both parties have an incentive to stay current with the payments.

Otherwise, experts advise against this strategy. If either person stops making payments, the house could go into foreclosure, and the credit scores of both will take a nosedive.

If you have no choice but to remain joint borrowers with your ex-spouse, seek legal advice from an attorney first. An attorney may be able to help protect your finances if your ex stops making payments.

The first four options mentioned above require more work, but the odds of a successful outcome are much higher.

How to remove someone from a mortgage by refinancing

Refinancing is generally the best way to take a person’s name off a mortgage. Depending on your lender, it may be the only way.

If you have sufficient home equity, credit, and income — and your ex-partner agrees to give you the house — you should be able to refinance your current mortgage in your name only.

Refinancing means you draw out a brand new mortgage to pay off your current one. To qualify for a refinance loan, you’ll need to show the mortgage lender that you have a strong enough credit history and enough monthly income to make mortgage payments on your own.

Qualifying for a mortgage refinance loan

Guidelines vary by loan program and lender, but refinancing a mortgage typically requires:

• A new loan that’s typically 80% or less of the property value
• A credit score of at least 620 (conventional and VA loans) or 580 (FHA loans)
• A debt-to-income ratio below 45%
• Steady employment and income

Dealing with the final two prerequisites might prove to be the most challenging. If you weren’t the main breadwinner in the home, you may not have enough income to qualify for the loan on your own.

But here’s a tip: If you will receive alimony or child support, give your mortgage lender those details. That income may help you qualify for the refinance without relying on a family member to co-sign.

Use a Streamline Refinance to reduce time and cost

If you have an FHA or VA home loan, you may be able to use a Streamline Refinance to remove a co-borrower’s name from the mortgage.

Streamline Refinancing typically doesn’t require income or credit approval, and you don’t need a new home appraisal. These loans often close faster and cost a bit less than a traditional refinance.

However, if you want to remove your ex-spouse’s name from the mortgage using a Streamline Refi, the lender may need to pull your credit report. It depends on your situation.

• The FHA Streamline may allow you to remove a name without credit and income verification if the remaining borrower can prove they’ve made the past six months’ mortgage payments or more on their own. If they can’t prove they’ve been making payments on their own or that they assumed the loan at least six months ago, they’ll have to re-qualify for the new mortgage
• The VA Streamline Refinance (a.k.a. VA IRRRL) may allow you to remove a name without credit re-verification. But the person remaining on the loan must be the VA-eligible veteran, not a non-VA-eligible spouse

USDA loans also have a Streamline Refinance option. However, if you use the USDA Streamline Refi to remove a name from the loan, the remaining borrower will need to re-qualify for the loan based on the borrower’s credit report and income.

Pros and cons of refinancing to remove someone from a mortgage

Divorce and separation are emotionally taxing processes, and one important but complicated issue that needs resolving is how to divide up joint financial obligations, like the mortgage.

There are a few pros and cons to consider when you are figuring out how to remove someone from a mortgage without refinancing.

Advantages of removing a name from a mortgage by refinancing

Aside from removing a borrower’s name, there may be benefits to refinancing your home. Refinancing offers a chance to hit the reset button on mortgage debt. Your new loan could offer something your current loan doesn’t, like a lower interest rate or a chance to cancel mortgage insurance premiums.

Let’s explore some of these possible advantages.

Shortening your home loan’s term

Even if you’re well into your home loan term, you don’t have to start over at 30 years. You could potentially refinance into a 20-, 15-, or even 10-year loan term to pay off your house on schedule — or sooner than originally planned.

Just note that a shorter term will have higher payments, which you will pay on your own. But shorter terms will usually save thousands in long-term interest.

Lengthening your home loan’s term

Lengthening your home loan term spreads the debt across a longer period of time, and doing this can lower monthly payments. Sometimes it can reduce them significantly, relieving a lot of stress on your budget.

But in return, you’ll pay more in interest throughout the life of the loan because the lender has more time to charge interest.

Reducing the loan’s mortgage rate

Now that rates have returned to historic norms, getting a lower mortgage rate is harder. But some borrowers still have room to improve their rates.

For example, if you and your ex-spouse bought the home at a time when rates were high, you may qualify for a lower rate now. Or, if your credit score and income are higher now than when you closed the current loan, you may qualify for a lower rate.

Eliminating mortgage insurance

Depending on your current loan type, a new loan could save money by eliminating the need for mortgage insurance.

FHA and USDA loans, which are popular with first-time home buyers, normally charge permanent mortgage insurance fees. When you refinance into a conventional loan with 20% equity in the home, you won’t need mortgage insurance. This could save hundreds of dollars per month.

’Cashing out’ the spouse

There’s a chance you’ll need to “cash out” your spouse, meaning the court orders you to pay your ex a percentage of the home’s equity in cash in exchange for removing their name from the title.

Cash-out refinancing requires the home to have at least 20% equity. But you’ll need much more than 20% if you are trying to transfer, say, 50% of the home’s equity.

Here’s how that might look:

• Home value: $350,000
• Current loan balance: $200,000
• Equity: $150,000
• Cash owed to spouse: $75,000 (50% of $150,000)
• New loan (not including closing costs): $275,000 (pays off existing $200,000 loan and cashes out $75,000 to pay spouse)
• Loan-to-value ratio (LTV): 78% ($275,000 divided by $350,000)

This scenario would qualify since you need 20% equity remaining in the home after the refinance (that’s a maximum LTV of 80%).

However, many homeowners don’t have this much equity in their homes yet.

Though conventional and FHA cash-out refinancing caps your new loan-to-value ratio at 80%, veterans can use VA home loans to cash out up to 100% of their home equity.

Disadvantages of removing someone from a mortgage by refinancing

While it is true that refinancing to remove someone from a mortgage has many advantages, there are a number of factors that could make this choice less attractive and lead to exploring other options.

The time and money needed to refinance a mortgage are two of the most noticeable drawbacks, but there are other considerations to bear in mind as well.

New mortgage loan application

Refinancing isn’t accessible to everyone, and the individual seeking to retain the property must qualify for the new mortgage independently. This can pose a significant hurdle if their income or credit score does not meet the lender’s requirements.

Qualification criteria can be stringent. You’ll typically need to complete a full mortgage application, supplying documents like W2s, bank statements, and pay stubs to support your financial information. Mortgage lenders also examine the applicant’s debt-to-income ratio (DTI), credit scores, income, employment stability, and the amount of equity in the home.

Not meeting these criteria can make refinancing unattainable for some. Moreover, closing on a refinance loan typically takes around a month.

Closing costs

While refinancing can lead to long-term savings, there are closing costs to pay. These can include application fees, origination fees, appraisal fees, and other upfront costs.

These expenses can add up, sometimes amounting to thousands of dollars. Refinance closing costs typically range from 2% to 5% of the loan amount, which is no small sum if you have a large outstanding loan balance. If you still owe $200,000 on the home, closing costs could run between $4,000 and $10,000.

For individuals who are already navigating the financial complexities of a separation or divorce, closing costs can be a significant burden. However, a disclaimer is essential here: while there are ways to get around closing costs, it’s important to calculate whether your new refinance loan offsets the expense of removing a spouse from a mortgage.

Interest rate variability

One of the significant risks associated with refinancing to remove someone from a mortgage lies in the variability of interest rates. Depending on the current market conditions, the mortgage interest rates available at the time of refinancing might be higher than those of the original mortgage. This increase directly impacts the monthly payments, potentially elevating the financial burden on the individual taking over the mortgage.

For instance, if someone initially had a mortgage at a 4% interest rate and the rates have risen to 7% at the time of refinancing, the effect on the monthly payments and overall interest can be substantial.

Consider a $300,000 loan over 30 years. At a 4% rate, the monthly payment (excluding taxes and insurance) is approximately $1,432. At a 7% rate, this payment jumps to around $1,996. This shift not only increases the monthly expense by over $560 but also adds a considerable amount to the total interest paid over the life of the loan.

How to remove a name from a deed

Regardless of which method you use to take your ex’s name off the mortgage, you’ll also need to get their name off the deed. To legally solidify the process, you’ll need a legal document, specifically a quitclaim deed, where your ex-spouse relinquishes all property rights.

Your ex should sign the quitclaim deed in front of a notary. Once this document is notarized, you file it with your local county office. This publicly removes the former partner’s name from the property deed and the mortgage.

If you refinance to remove the borrower, the title company will automatically remove the spouse’s name from the deed for you.

FAQ: How to remove someone from a mortgage without refinancing

What are today’s mortgage refinance rates?

Average refinance rates have bounced back from their historic lows of 2020 and 2021.

So, depending on your current loan, refinancing to remove your ex’s name from the mortgage could increase your interest rate. But you could still save money by shortening the loan term or eliminating mortgage insurance.

To get the best deal possible, be sure to shop around with at least three different mortgage refinance lenders. Compare interest rates as well as closing fees.