Breaking up (with your mortgage) is complicated
You’re parting ways with a spouse or co-mortgage borrower. You’ve agreed who will keep the house and take over the mortgage payments. But there’s a problem.
In the eyes of your mortgage lender, the “ties that bind” aren’t legally severed until you remove your ex from the mortgage.
To solve this problem you’ll need to remove a name from your joint mortgage loan. There are a few ways to do this. The best way is usually to refinance, which may be less of a hassle than you think.
Here’s what you should know.
In this article (Skip to...)
- Why remove a name?
- Refi to remove a name
- Remove a name without refinancing
- Selling the home
- One more (risky) option
- Remove a name from the deed
Why remove your ex’s name from the mortgage?
You and your ex-partner might agree on who will keep the house and take over the mortgage payments.
But to a lender, you’re both still on the hook for loan repayment until your spouse’s name or co-borrower’s name has been taken off the mortgage and deed.
As far as lenders are concerned, both people remain “jointly and severally” liable for the loan. In other words, the lender can come after either or both of you in the event of a default. And both of your credit scores will take a hit if your payment is late.
The only legal way to take over a joint mortgage is to get your ex’s name off the home loan.
The same goes for a co-borrower who no longer wants to be on the line for a mortgage they co-signed. If you find yourself in the position of needing to remove your name, or someone else’s name, from a mortgage, here are your options.
Refinance to get your name off a mortgage
Refinancing is 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 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.
To qualify for a refinance loan, you’ll need to show the lender you have a strong enough credit history and enough monthly income to make mortgage payments on your own.
Do I qualify for a refinance loan?
Guidelines vary by loan program and lender, but refinancing a mortgage typically requires:
- A new loan that’s 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
Those last two requirements could be the toughest to deal with. 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 lender those details. That income may help you qualify for the refinance without having to rely 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 a name from the mortgage
The obvious downsides to refinancing are the time and cost involved.
You’ll typically need to complete a full mortgage application, supplying documents like W2s and pay stubs to support your financial information. Closing on a refinance loan typically takes around a month.
And there are closing costs to pay. 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.
But there are ways to get around closing costs — and it’s possible your new refinance loan could save enough money to justify the expense of closing costs.
Save money while refinancing
Aside from removing a borrower’s name, there may be benefits to refinancing your home.
Mortgage interest rates are still low compared to historical averages. Refinancing might allow you to get a name off your mortgage and lower your interest rate and monthly payments.
This could make the mortgage more affordable for a newly-single homeowner.
Shorten your loan’s term
Even if you’re well into your 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’ll be paying on your own.
“Cash 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: $200,000
- Equity: $150,000
- Cash owed to spouse: $75,000
- 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%
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 the home.
Though conventional and FHA cash-out refinancing cap your new loan-to-value ratio at 80 percent, a VA home loan may allow you to cash out up to 100% of your home equity.
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.
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 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.
Selling the house
If neither borrower is able to afford the mortgage on their own, the only option may be to sell the home.
Fortunately, there’s 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 cover all the liens on the property.
If you’re unlucky, your mortgage lender can sue you for the difference between the foreclosure sale proceeds and the loan balance. This is called a “deficiency,” but in many states, 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.
A final (risky) option
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 do not recommend this approach. 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 require more work, but the odds of a successful outcome are much higher.
Removing a name from the 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.
You usually do this by filing a quitclaim deed, in which your ex-spouse gives up all rights to the property.
Your ex should sign the quitclaim deed in front of a notary. One this document is notarized, you file it with the county. 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 remove the spouse’s name from the deed for you.
FAQ on removing your name from a 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.
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.
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.
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.
What are today’s refinance rates?
Mortgage rates are still lower than historic averages. If you decide to refinance to remove your ex from the mortgage, you could also be in line to lower your interest rate and payments at the same time.
Check your rates to see if refinancing makes sense for you.