A divorce means splitting up the assets you have obtained throughout your marriage. One of the more difficult assets to split can be the home. Even after you decide who is going to get the home, a lender will not see the ties that bind as severed until the ex is taken off the mortgage. There are a few different ways that you can remove an ex’s name from a mortgage.
Refinance the loan in your name only
This option is one of the most labor-intensive ones but may be the best solution. You may be able to refinance if you have sufficient equity, credit, and income, and your ex agrees to give you the house. Lenders will want you to prove that you are able to make the payments yourself. To do this, you’ll fill out applications and document your assets, income, debts, and credit history.
Once the lender approves your refinance, you should get your ex-spouse’s name off the deed. This is usually done by filing a quitclaim deed, which states that your ex-spouse gives up all rights to the property. The quitclaim should be signed in front of a notary and then filed with the county. The filing of the quitclaim publicly removes the partner’s name on the property deed and the mortgage.
Apply for loan assumption
To apply for a loan assumption, inform your lender that you are taking over the mortgage and want a loan assumption. Under an assumption, you take full responsibility and remove your ex from the loan. The terms of the loan would remain the same. The only difference would be that you would be the sole borrower. You should also ask the lender for a release of liability. This ensures that the obligation to pay is eliminated should the person on the loan fail to pay.
However, many lenders don’t agree to loan assumptions. If a lender does agree, they will want evidence that the remaining borrower can afford the payments on their own. Additionally, loan assumptions aren’t free. They can cost up to one percent of the loan amount, plus administration fees of $250 – $500.
Get an FHA or VA streamline refinance
If you have an FHA-back mortgage, you can apply for a streamline refinance. A streamline refinance allows you to take a borrower off the mortgage and reduce the size of your monthly payments. To get a streamline refinance, you must prove that you assumed the home and the FHA loan more than six months prior and that you’ve made at least six payments by yourself. If you haven’t completed these, income requalification may be necessary.
Similar requirements follow for a VA-backed mortgage. However, generally, an eligible veteran must remain on the loan, as the VA mortgage was designed for veterans.
Sell the house
Selling the house and splitting the proceeds may be the easiest fix. However, selling a house may be more difficult in a buyer’s market or if you owe more than your house is worth. In some cases, you may have to opt for a short sale, in which the net proceeds from the sale of the house do not cover the liens against the property.