Removing Yourself From A Mortgage: The Complete Guide

Removing yourself from a mortgage is a complex process that depends on several factors, including your relationship with the co-owner and the reason for removal. The process typically involves legal and financial considerations, and it is recommended to seek professional advice. The most common reason for removal is legal separation or divorce, but other reasons include business partnership splits, death, bankruptcy, or other significant life changes. The specific steps to remove yourself from a mortgage vary depending on the country and individual circumstances, but generally, it requires providing certain documentation, transferring ownership, and potentially refinancing the mortgage.

How do I remove myself from a mortgage?

Removing a spouse from a mortgage

When a married couple divorces, they must divide their assets, including real estate. If you are keeping the family home after a divorce, you will almost always need to remove your ex-spouse from the mortgage by refinancing the mortgage in your name. This involves applying for a new loan in your name only and passing the lender's eligibility requirements. You will need to demonstrate that you will be able to make the payments and meet the terms of the loan. The lender will consider your assets, income, debts, and credit score.

It is important to note that transferring the title of the property to your name will not automatically remove your spouse from the mortgage. You will need to take additional steps to ensure they are no longer liable for the loan. One way to do this is by using a quitclaim deed, which transfers ownership of the property from one person to another without warranties of title. However, a quitclaim deed does not release the spouse from the mortgage obligation, and they may still be liable for mortgage payments even after transferring their ownership rights. Therefore, it is crucial to ensure that the lender agrees to remove your spouse from the mortgage note itself.

Another option for removing your spouse from the mortgage is to assume the loan, but most lenders will not agree to this. If you are creditworthy and can prove that you can continue to make the mortgage payments on your own, the lender may release your spouse from the loan. This option may be more feasible if your loan is held by a government entity, such as the Veteran's Administration (VA).

Removing your spouse from the mortgage is a complex process, and it is recommended to consult a knowledgeable family law or divorce attorney to understand the legal and financial implications and ensure that all necessary steps are taken.

Getting a lawyer to remove a name

While it is possible to remove a name from a mortgage without a lawyer, the process is complex, and a lawyer can help you navigate it.

First, you will need to obtain a copy of the deed to determine who is listed on the title and who can be removed. The deed will tell you who owns the property. If you are looking to remove your name, you will need to transfer ownership to the other party. This can be done through a quitclaim deed, which will transfer ownership of the property to the other party. However, it is important to note that a quitclaim deed will not remove you from the mortgage note.

To be removed from the mortgage note, the other party will need to refinance the loan in their name alone. This involves taking out a new loan to pay off the old loan. Once the old mortgage is paid off, you will have successfully removed yourself from the note. However, refinancing may not always be possible due to financial constraints, credit issues, or lender restrictions. In this case, you may need to explore alternative options, such as a loan assumption or loan modification.

A loan assumption is when one party takes over the full responsibility of the mortgage with the lender's approval. This option is not always available and depends on the original loan terms and lender policies. A loan modification, on the other hand, allows you to change the terms of the mortgage loan without refinancing. It is typically used to lower the borrower's interest rate or extend their repayment period. While modification is usually only allowed in cases of financial hardship, some lenders may accept divorce or legal separation as a reason for modification.

If you are looking to remove your name from a mortgage, it is important to consult with a lawyer to understand your options and navigate the complex process. The cost of hiring a lawyer for this process can vary depending on your location and the lawyer's fees, but it is likely to be in the range of $350 to $500 or more.

Refinancing the mortgage

Refinancing is one of the most common methods of removing yourself from a mortgage. This is when the person who will retain ownership of the property refinances the loan in their name only. This method is usually less of a hassle than one might expect, and it may be faster than other options. However, it is not always possible for one owner to refinance.

To refinance, you will need to get permission from the other mortgage holder and your mortgage lender. You will also need to provide certain documents, including the title deed, a land transfer form, and a quitclaim or warranty deed form. The cost of this process will depend on how much your lawyer charges and where you live. In Canada, for example, you could pay anywhere from CAD 350 to CAD 500 or more.

If you are 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 could involve selling the property and paying off or settling the mortgage debt. However, selling the home can be challenging, especially if real estate prices have dropped since you bought it. In this case, you may have to opt for a "short sale," where the net proceeds do not fully cover all the liens on the property. It is important to note that even if the lender releases you from liability, both your credit score and that of your spouse will be negatively impacted by a short sale.

Selling the property

There is a strong seller's market in many parts of the nation, as housing has been in short supply. Therefore, it may be possible for home sellers to get a great offer on their property. However, if real estate prices have fallen, selling the home could be much more challenging, especially if the home was recently purchased and the minimum down payment was made. In this case, a "short sale" may be necessary, where the net proceeds do not fully cover all the liens on the property.

To sell the property, you will need to obtain a copy of the deed to clarify who is listed on the title. You will also need to provide documentation, including the title deed, land transfer form, and a quitclaim or warranty deed form. Additionally, you will need to provide information such as the name of the person transferring ownership, the property address, the date of the transfer, and pertinent financial and tax information.

It is important to note that selling the property will only remove you from the mortgage if the sale pays off the mortgage debt in full. If the sale does not generate enough proceeds to cover the mortgage debt, the mortgage lender may sue for the difference between the sale proceeds and the remaining loan balance.

Bankruptcy

If you are looking to remove yourself from a mortgage, it is important to note that the process is not always simple. It is also important to differentiate between removing a name from a mortgage and removing someone's ownership rights. If two names are on the mortgage, both parties are financially responsible for repaying the loan. However, it is the names on the promissory note that determine legal ownership of the home.

One way to remove yourself from a mortgage is by filing for bankruptcy. If you file for bankruptcy, your debts, including your mortgage debt, may be discharged, meaning you no longer have to pay them. This can be a good option if your co-borrower is in dire financial straits and considering bankruptcy. However, it is important to note that bankruptcy should be treated as a last resort and you should seek legal advice before proceeding.

To legally remove yourself from a mortgage, you must get permission from the other mortgage holder and your mortgage lender. You may also need to submit specific documents, such as the title deed, a land transfer form, and a quitclaim or warranty deed form. Additionally, you may need to provide information such as the name of the person transferring ownership, the property address, the date of the transfer, and pertinent financial and tax information.

The cost of removing yourself from a mortgage will depend on your lawyer's fees and your location. It is likely to cost anywhere from $350 to $500 or more. If you choose to refinance your mortgage, closing costs can range from 2% to 6% of the loan amount, but some lenders offer no-closing-cost refinance loans.

It is important to carefully consider your options and seek professional advice before making any decisions about removing yourself from a mortgage.

Frequently asked questions