Removing A Co-Signer From Your Mortgage: A Step-By-Step Guide

There are several reasons why someone may want to be removed from a mortgage, such as divorce or the end of a domestic partnership. Removing a name from a mortgage can be a complex process, and it's important to understand the options available. While refinancing is often considered the best method, it may not be feasible for everyone due to the associated costs and challenges of qualifying for a new loan. Alternative options include loan assumption, loan modification, selling the property, or paying off the entire mortgage. Additionally, a quitclaim deed may be necessary to remove ownership rights and ensure a complete separation from the mortgage agreement.

How to take someone off a mortgage

Removing a name from the deed

Removing a name from a property deed, also known as a title deed, requires filling in a series of forms and sending them to HM Land Registry. The exact procedure depends on factors such as whether the property has a mortgage. The process for removing a name from the deed is similar to that of removing a name from the mortgage, and the two should be done together to legally solidify the process.

Firstly, you will need to fill in the application to change the register, known as form AP1. You can obtain a copy of the official title register for a small fee from the Land Registry website. The transfer deed, often referred to as TR1, must be signed by all property owners, including the one who is being removed. Form ID1 is the certificate of identity for a private individual and must be completed by a solicitor. You must also provide a valid form of identification, such as a current photocard driving licence.

If the person being removed from the deed has passed away, you should fill in the deceased joint proprietor (DJP) form and send it to the HM Land Registry Citizen Centre. If the person does not consent to having their name removed, you may need to go through partition actions, which are lawsuits that force co-owners to give up their ownership interests.

It is important to note that removing a name from a deed does not automatically remove them from the mortgage. The mortgage servicer will still hold all borrowers responsible for the debt. Thus, it is recommended to obtain a legal document, specifically a quitclaim deed, where the removed individual relinquishes all property rights. This document should be signed in front of a notary and then filed with the local county office.

The time required to remove a name from the deed and mortgage can vary from several weeks to a few months, depending on the complexity of the case and the lender involved. The process typically incurs costs, including refinancing, loan assumption, and loan modification fees.

Refinancing the mortgage

Refinancing a mortgage offers a chance to reset the mortgage debt. Your new loan could offer something your current loan doesn't, like a lower interest rate or the chance to cancel mortgage insurance premiums. You could also potentially refinance into a shorter or longer loan term to pay off your house sooner or lower monthly payments. If you and your ex-spouse bought the home when mortgage rates were high, you may qualify for a lower rate now, especially if your credit score and income are higher.

However, refinancing comes with additional closing costs and the potential challenge of qualifying for a new loan, which need careful consideration. You will need to complete a loan application and provide documentation such as proof of income, tax returns, bank statements, brokerage statements, and information about your current mortgage.

Loan assumption

Mortgage assumption allows a buyer to take on the original loan balance at the original terms, but it doesn't account for any home equity the seller has built. For example, if the seller has a $300,000 loan balance on a $435,000 home, the buyer will need to pay $135,000 to compensate the seller for the equity. The buyer must also meet the lender's requirements, such as having sufficient assets and being creditworthy.

Mortgage assumption can be a valuable option if you're looking for a lower interest rate and want to simplify the home-buying process. It is also a good option if you are unable to refinance your existing mortgage, as it doesn't require refinancing. However, it may be risky and should only be used as a last resort. It is important to note that not all lenders allow loan assumption, so you will need to negotiate with your lender to see if it is an option for you.

Loan modification

To take someone off a mortgage, the most straightforward way is to refinance. However, refinancing may not always be possible due to financial constraints. In such cases, a loan modification could be a viable alternative.

To qualify for a loan modification, borrowers typically need to meet certain requirements, including providing proof of significant financial hardship and demonstrating that they are at least one month behind on their loan payments. The specific steps and requirements for loan modification may vary depending on the lender and the loan type. It is important to consult with a qualified professional to understand the options available and the potential impact on your financial situation.

It is worth noting that even if loan modification is successful, there is still a risk of losing your home if you cannot make the modified payments. Therefore, it is crucial to carefully consider your options and seek appropriate financial advice.

Bankruptcy

Firstly, it is important to distinguish between the different types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves the liquidation of assets to repay debts, and it can eliminate your mortgage obligation. This means that if you are current on your mortgage payments and can protect your home equity with exemptions, you may be able to retain your home. However, if you are unable or unwilling to pay the mortgage, the lender can still enforce their lien rights and foreclose on the property.

On the other hand, Chapter 13 bankruptcy allows for the reorganization of debts into a manageable repayment plan over three to five years. This option can help you get your house out of foreclosure permanently and may even reduce the principal balance owed through a cramdown or lien strip. To qualify for lien stripping, the balance of the senior lien or liens must exceed the property value.

Regardless of the chapter, bankruptcy will impact your finances and credit score. It is considered a last resort and can make it challenging to obtain loans or mortgages in the future. However, it is possible to rebuild your credit and eventually qualify for a mortgage again, even with a previous bankruptcy on your record.

Before filing for bankruptcy, it is crucial to consult with a bankruptcy lawyer to understand the specific implications for your unique situation. Additionally, ensure that you are transparent with all financial and property disclosures to avoid any potential fraud investigations.

In summary, bankruptcy can be a complex and risky process for removing someone from a mortgage. It is important to carefully consider all options and seek professional advice before making any decisions.

Frequently asked questions