Getting a divorce is all kinds of stressful. You’ll need to make important decisions that could dramatically impact your life moving forward. One of the biggest decisions you’ll need to make is what to do about the house. (Including your primary home and any rental properties you own.) If your spouse wants to keep the home, you’ll need to learn how to take your name off a mortgage.
You might be tempted to skip this step and simply trust your spouse to keep making payments on the mortgage. This could be a costly mistake if they ever start missing payments. So, how do you get your name off the mortgage after a divorce? We’ll discuss five different options to get off your mortgage, post-divorce. First, though, let’s look at why it’s so important to take your name off your mortgage.
Determine Who Will Take the Home
For many couples, their home is their greatest financial asset. It can also possess a significant amount of emotional value. During your divorce negotiations, you’ll need to decide if you both want to sell the house or if one spouse wants to keep the house.
If you purchased the house while married or if both spouses contributed financially to the mortgage, the house will be considered marital property. That means both spouses are entitled to a portion of the home’s equity.
If your spouse decides to keep the house, they will have to find a way to pay your portion of the equity. You will also need to clearly state in your divorce decree or settlement agreement that your spouse will take possession of the home and be responsible for all mortgage payments moving forward.
This is important — even if your settlement agreement says that your spouse will take over all payments on the house, that doesn’t mean you are out of the woods. As long as your name is still on the mortgage, you are equally responsible for the payments. The credit companies and your lender don’t care of your divorce decree says. That’s why you need to make sure to get your name off the mortgage of any properties your spouse is taking over after the divorce.
Why You Need to Take Your Name Off the Mortgage
After a divorce, taking your name off the mortgage is an essential post-divorce step for several reasons. First, it’s important to separate yourself from any financial obligations to your ex-spouse. You don’t want their poor financial management to affect your credit score or ability to obtain financing in the future. Also, you don’t want to be legally obligated to pay the mortgage when you no longer have a stake in the home.
Second, if your spouse starts missing payments or stops making payments altogether on the mortgage, it could have serious consequences for both of you. If you’re still liable for the loan, then you’ll still have responsibility for it even after a divorce. Even if your ex is able to make payments now, that might not always be the case. A lost job or expensive health emergency could lead them to miss payments, which you would be responsible for.
Finally, a mortgage in your name will impact your credit score and your ability to qualify for loans. When reviewing a loan application, a bank will look at your debt-to-income ratio. A mortgage on your credit report will be considered a debt. If you keep a mortgage on your credit report, you may have trouble qualifying for a loan if you want to buy a new home or even take out a car loan. Future landlords and even employers may also make decisions based on your credit report.
How to Get Your Name Off a Mortgage
It’s usually not easy to get your name off a mortgage after divorce, and you’ll need the help of your ex, but it’s still an important step to take. Fortunately, you have a few options. Five ways to get your name off your home mortgage are
- Refinance the home
- Apply for a loan assumption
- FHA streamline refinance
- Sell the house
- Pay off the mortgage
Each of these methods will also work for taking your name off the loan of a rental or investment property.
Ask Your Ex-Spouse to Refinance the Home
One of the most common ways to get your name off the mortgage after divorce is to have your ex-spouse refinance the mortgage. This means, essentially, taking out a new mortgage and using those funds to pay off the old mortgage balance.
If you’ve built enough equity in the house, your ex-partner may be able to take some of that money out through a cash-out refinance and pay you back your share of the equity in the house.
To start the process of removing your name from the mortgage through a refinance, it’s crucial to communicate openly and work with your ex-spouse. Together, you’ll need to find a lender who is willing to approve the refinancing application based on your ex-spouse’s financial situation. This typically involves a credit check, income verification, and a reassessment of the property’s value.
Qualifying for a refinance can be difficult for many newly single individuals. Your ex will need to show the bank that they are financially able to handle the mortgage on their own without the help of your income. If your spouse earns less than you, they may not be approved for the new loan.
Additionally, if interest rates have risen since you took out your mortgage, your ex-spouse’s new mortgage payment could be significantly higher.
Have Your Ex-Spouse Assume Your Existing Mortgage Loan
Rather than refinance and take on a whole new mortgage loan, your ex-spouse can instead simply assume your existing mortgage in their own name. First, it’s important to check the terms of your original mortgage agreement to determine if assumption is allowed. If loan assumption is permitted, your ex will need to apply and qualify for the assumption.
In many ways, qualifying to assume an existing mortgage is similar to qualifying for a refinance. The lender will likely require financial information, including proof of income, credit history, and other relevant financial documents. Your ex may also need to provide a copy of your divorce decree or settlement agreement, which outlines the distribution of assets and liabilities, including the assumption of the mortgage.
In essence, your ex-spouse will need to show that they have the financial capacity to handle the mortgage on their own. It can be difficult for a newly divorced individual to assume a mortgage loan. Many mortgage lenders don’t want to shift a loan from two people to one because this will increase their financial risk.
Additionally, if your ex-partner assumes your existing loan, they won’t be able to take money from the home to pay out your portion of the equity. On the other side of the coin, if you were able to lock in low interest rates on your original loan, assuming the loan could keep mortgage payments lower for your ex.
Have Your Spouse Request an FHA Streamline Refinance
The FHA streamline refinance option may be available for those with an FHA-backed mortgage. This is, essentially, a refinance of the mortgage but with special features. An FHA streamline refinance requires less paperwork than a traditional refinance. It allows your ex to remove you as a co-borrower and could even lower their mortgage payment. Lowered payments can be a huge benefit for anyone transitioning to paying the loan with just one income.
In order to qualify for an FHA streamline refinance, you must have been paying your FHA mortgage for at least six months and your ex-spouse must show that they’ve made at least six payments using only their income. You can learn more about this special FHA refinance from the US Department of Housing and Urban Development.
Sell Your Home
It isn’t easy for an individual to qualify for a refinanced mortgage or assume an existing mortgage loan on their own. If your spouse simply can’t get qualified, the only option remaining may be to sell the home.
Obviously, this isn’t ideal if your ex wants to keep the home, but it will allow you to get off the mortgage. Selling the home will also make it easier for you to split the equity you’ve built up in the house.
In some cases, you may decide you’re willing to keep your name on the mortgage even after you move out. Maybe you feel you owe it to your ex or maybe you want to ensure your children stay in the house to keep their environment stable. If this is the case, you’ll need to accept the risk that your financial health and credit history will be tied to the mortgage and your spouse’s actions.
Pay Off the House
The simplest way to get off your mortgage may also be the most difficult for many Americans. Paying off your home will get rid of the mortgage entirely, along with any financial obligation you have towards the loan. However, most people don’t have the funds to do that, especially if they are going through a divorce and dividing their assets. Even if you did have the funds, paying off your mortgage could mean sinking a large amount of your money into a property you won’t own.
In some unique cases, paying off the house may make sense. For example, if you’ve had the house for a long time and the mortgage is nearly paid off, it might not take too much more money to clear the mortgage. You’ll just need to make sure your spouse can pay you your portion of the equity in some other form. In another example, if you have two investment properties of similar value and adequate funds, you can pay them both off and each spouse can take one property.
It’s a good idea to work with a knowledgeable divorce attorney and/or a divorce financial expert during the divorce settlement process to determine the best way to deal with your house or any shared property.
File a Quitclaim Deed
If your spouse is able to qualify for a refinance or can assume your existing mortgage, the final step is to also remove your name from the property deed. You can use a quitclaim deed to give up your right to the property.
You’ll need to complete the quitclaim form and sign it in front of the loan officer. The officer will notarize the document and remove your name from the deed and mortgage. Remember to do this only after your spouse has refinanced the house or assumed the mortgage. If you fill out a quitclaim deed while your name is still on the mortgage, you could be on the hook for paying the mortgage on a house you no longer own!
Getting Off Your Home Mortgage After a Divorce Is Worth the Effort
It can take a lot of effort and a lot of paperwork to take yourself off your mortgage after a divorce. You’ll also need to work with your ex-spouse, which may not be pleasant. However, all the work is worth it in order to protect your financial future after the end of your marriage. If your ex is slow to take the steps needed to get you off the mortgage, continue to follow up. You can also work with your divorce attorney to ensure they hold up their end of your divorce settlement or divorce decree.
Have more questions about the ins and outs of divorce? Look for a Second Saturday Divorce Workshop near you.
FAQs on Getting Your Name Off the Mortgage
Can I remove my name from the mortgage without refinancing?
Refinancing is a popular way for individuals to take their name off a mortgage after a divorce, breakup, or separation. However, there are other ways to accomplish this task. Your ex can work with your lender to assume your current mortgage. You can also choose to sell the house or pay off the mortgage, though these options won’t work for everyone.
Will removing my name from the mortgage affect my credit score?
Removing your name from your mortgage can impact your credit score in multiple ways, although the extent of that impact may vary depending on your circumstances. While removing your name from the mortgage may alleviate the direct impact on your credit, your credit report may still reflect the history of the mortgage and its associated payments. Late payments or defaults by the remaining borrower(s) can potentially affect your credit score. Monitoring your credit report regularly can help you stay informed about any potential issues.
It’s important to note that the credit reporting practices of lenders may differ. In some cases, the lender may continue reporting the mortgage on your credit report even after your name has been removed. This could impact your credit utilization ratio and overall credit profile. Additionally, the credit scoring models used by credit bureaus take into account various factors when calculating credit scores, and the removal of a mortgage may impact certain factors like credit mix and length of credit history.
What happens to the equity I have in the property if I remove my name from the mortgage?
As long as your name is on the deed of the home, you have an ownership stake in the property regardless of whether or not you are on the mortgage. Taking your name off a home mortgage simply means you are no longer liable for the mortgage. If your ex-spouse wants to keep the home, make sure you receive your share of equity from the home before taking your name off the deed, (which can be done by filling out a quitclaim deed.)
How long does the process of removing my name from the mortgage typically take?
The process of removing your name from a mortgage can vary depending on several factors, including the lender’s procedures, the complexity of the situation, and your ability to work with your ex-spouse. A lot will also depend on whether your ex-spouse can qualify for a refinance or assume your existing mortgage and how quickly they move through that process.
While it’s challenging to provide an exact timeline, you’ll typically have to follow these steps
- Consultation and planning: Start by discussing your intentions with your ex-spouse and potentially seek legal advice. Consider your options and reach an agreement on the removal of your name from the mortgage. This stage can take several weeks or even months, depending on the complexity of the divorce and the willingness of both parties to cooperate.
- Documentation and submission: Gather the necessary documentation required to either request a loan assumption or to refinance the mortgage. In the event of a loan assumption, your ex-spouse will likely need to provide a copy of the divorce decree or settlement agreement, which outlines the terms of property division and the assumption of the mortgage. Prepare the required paperwork and submit it to the lender. This step can take a few weeks, depending on the efficiency of communication and the speed of document preparation.
- Lender review and approval: The lender will review your application and the supporting documents to assess your ex-spouse’s eligibility to assume the mortgage individually or to qualify for a refinance. They will evaluate their creditworthiness, income, and financial stability. The duration of this step can vary, typically taking a few weeks for the lender to complete their review.
- Finalizing the process: Once the lender approves the assumption or a refinance, they will produce legal paperwork that needs to be reviewed and signed. The exact duration can vary, but it typically takes a few weeks to complete the necessary paperwork and finalize the process.
Are there any fees or penalties associated with removing my name from the mortgage?
Fees and penalties associated with removing your name from a mortgage can vary depending on the terms of your specific mortgage agreement and the policies of your lender. Common fees include:
- Assumption fee: Some lenders charge an assumption fee when one party seeks to remove their name from the mortgage. This fee covers the administrative costs associated with processing the assumption request. The amount can vary and is typically payable by the party assuming sole responsibility for the mortgage.
- Refinancing costs: If the process of removing your name from the mortgage involves refinancing, your ex-spouse may be subject to typical refinancing costs. These can include application fees, appraisal fees, title search and insurance fees, attorney fees, and closing costs. You and your ex will need to consider these expenses when evaluating the financial implications of the name removal process.
- Prepayment penalties: Some mortgage agreements have prepayment penalties, which are charges imposed if you pay off the mortgage early or remove your name before a specific period has elapsed. These penalties are intended to compensate the lender for potential lost interest. Review your mortgage agreement or consult with your lender to determine if any prepayment penalties apply in your situation.
- Legal and professional fees: Depending on the complexity of your divorce settlement you may need to pay legal or financial professionals for their services. Attorneys, mediators, or financial advisors can provide guidance throughout the process, but their fees should be considered as part of the overall cost.
What documentation do I need to provide to remove my name from a mortgage?
To remove your name from a mortgage, you typically need to provide specific documents to your lender. The exact requirements may vary depending on the lender’s policies and your situation. Some common documents that may be requested are:
- Divorce decree or settlement agreement: This document outlines the terms of the divorce and may include provisions regarding the division of assets, liabilities, and property. It serves as evidence that your ex-spouse will assume sole responsibility for the mortgage. These documents are typically required if your ex is assuming your existing mortgage loan.
- Assumption application: Your lender may require you and your ex-spouse to complete an assumption application. This form typically collects information about the assuming party’s income, assets, and credit history. It helps the lender evaluate their eligibility to take over the mortgage.
- Financial documentation: Your ex-spouse may be asked to provide financial documentation to support the assumption application or a refinance application. This can include recent pay stubs, bank statements, tax returns, and any other documentation that demonstrates their financial stability and ability to afford the mortgage payments on their own.
- Identification documents: Both you and your ex-spouse will likely need to provide valid identification documents, such as driver’s licenses or passports. This helps verify your identities and ensure that the correct individuals are involved in the name removal process.
- Mortgage-related documents: Your lender may require copies of the original mortgage agreement, promissory note, and any amendments or modifications made to the loan terms. These documents help the lender verify the existing mortgage details and facilitate the necessary changes.
- Additional documentation: Depending on the lender’s requirements and the specific circumstances, your ex-spouse may be asked to provide additional documentation. This could include proof of homeowners insurance, a title search report, a property appraisal report, or any other relevant documents specific to your situation.
Will I still be liable for the mortgage if my name is removed from it?
If your name is removed from a mortgage, it generally means you are no longer personally responsible for the loan. However, it’s important to note that the removal of your name from the mortgage does not automatically absolve you of any financial or legal obligations related to the property or the mortgage itself.
The specific legal obligations associated with the mortgage may depend on the jurisdiction and the terms outlined in the divorce decree or settlement agreement. You may want to consult with a legal professional to ensure that the appropriate legal steps are taken to release you from any ongoing obligations related to the mortgage.