When you head into a divorce, you have many decisions to make. Some of those involve dividing your marital property. Dividing property is rarely a cut-and-dried process, and both you and your ex must negotiate where you will draw that line.
If you’ve agreed that you get to keep the house, a verbal agreement isn’t enough. If your ex-spouse’s name is on the deed and mortgage, they legally remain responsible for the mortgage repayment. Even a legal divorce does not change the terms of your loan. If you fall behind on payments, both you and your ex will face credit problems.
Also, the lender has the right to go after your ex if you default on the loan. You simply don’t want to have your finances tied closely through your mortgage after a divorce. Removing a name from the mortgage after separation is the best way to resolve this potential problem. Here are four ways you can do this.
Refinancing the loan to just your name is effective at removing a name from the mortgage documents. However, refinancing is not something to jump into without enough thought. First, the process takes quite a bit of time. Second, you will need to prove that you can pay the mortgage on your own without your spouse’s contributions.
Remember, removing a name from the mortgage after separation also removes the income your spouse contributed to your mortgage. This option is only available to you if you have sufficient credit, income, and equity to qualify for a new mortgage without your ex-spouse’s name on the loan.
If you decide to refinance, make sure you know what this entails. If your divorce agreement gives you the house in full outright, and you can afford a new mortgage, this is an option.
However, you may find that you have to “cash-out” your spouse. This means giving your ex-spouse half of the home’s equity in cash. You can use a cash-out refinance to do this, but only if the home has sufficient equity to support this move.
After you’ve refinanced, take care of the deed as well. You will want to remove your ex-spouse’s name from the deed once the mortgage is taken care of. A quitclaim deed is an easy way to do this. This is a simple legal document filed with the county that gives you full rights to the property and removes the co-owner’s name. By signing a quitclaim deed, your ex is signing over his or her rights to the property, in full, to you.
2. Apply for Loan Assumption
Are you asking yourself, “Do I have to refinance after divorce?” the answer is no. There is one other option to keep the home and remove your spouse’s name without refinancing, and that is through loan assumption.
Inform your lender in writing that you wish to take over the mortgage completely through loan assumption. This allows you to take full responsibility for the loan, removing the spouse from the mortgage after separation.
If the lender agrees, this releases the liability for the spouse who is not keeping the house if the one who is keeping the house fails to make payments.
This process is relatively simple, but unfortunately, many lenders will not agree to it. Assuming a mortgage after divorce, particularly when you have used your spouse’s income to pay the mortgage, is a big risk.
If the lender agrees, they will likely want to see that you have the income to pay the mortgage alone. Also, there will be a cost for loan assumption, typically about 1 percent of the loan plus administrative fees, to cover the lender’s time doing the paperwork.
3. FHA Streamline Refinance
If you happen to have an FHA backed mortgage, the FHA streamline refinance may give you an easier way to refinance after a divorce. This refinance tool is available on loans you have had for at least six months, and also requires you to prove that you made at least six payments without your spouse’s income.
The FHA streamline refinance has several benefits. First, it’s a streamlined loan, which means you can get it with less paperwork than a traditional refinance. Second, it allows you to not only remove a co-borrower from the mortgage but also lower your payments. If you are transitioning to paying the loan with just one income instead of two, lowered payments will be a huge benefit.
4. Sell the Home
If you are struggling with determining how to get out of a joint mortgage and find that refinance or assuming a mortgage after divorce is not working for you, the best scenario may be to sell the home and split the proceeds with your ex.
This allows both of you to move on and removes the challenge of removing a name from the mortgage after separation. It also may be your only option if you cannot afford your mortgage and the home’s upkeep on your own.
Selling a home, particularly when you are in the midst of divorce proceedings, can be stressful. It may be the simplest way to remove your spouse’s name and move on, but it takes time and money to do successfully.
If you are struggling with how to remove a name from a mortgage without refinancing, consider selling your home to HomeGo. You will get a fast and easy sale with a same-day cash offer for your home as-is, so you can start rebuilding your life after divorce.
With HomeGo, you no longer have to struggle with what to do about your spouse’s name on your mortgage. Simply sell it for cash, split the difference, and start over with a clean slate. Reach out to HomeGo today to learn more about how you can sell your home after divorce.