Separating marital assets can be difficult to navigate. Here’s what to know about removing a spouse’s name from a home mortgage.
To remove a spouse’s name from a home mortgage, spouses must acquire a new loan that lists one spouse on the mortgage agreement. The new mortgage agreement may require refinancing of the home as well.
Why Remove a Spouse’s Name from a Home Mortgage?
When spouses get legally separated or divorced, removing a spouse from a mortgage may be necessary. To protect lenders and spouses, a professional must reassess a mortgage agreement before granting a solo loan.
Related: How to Protect Your Assets in a California Divorce
How to Remove a Spouse’s Name From a Home Mortgage
A couple must refinance their loan before removing a name from the mortgage. Since a lender approved the original loan with two names, they must now agree to a new agreement with one name.
How to Get a New Loan
1. Eligibility
To get a new mortgage, a spouse must pass the lender’s eligibility requirement to refinance the agreement. A lender assesses a party’s assets, income, debts, and credit score to determine if a spouse can qualify for a new loan.
2. Quitclaim Deed
Once eligible, a spouse must take their name off the deed and mortgage of the home. A quitclaim deed can allow one spouse to give up their right to property. The spouse must sign the quitclaim in front of the loan officer who can notarize the document.
To ensure the process is completed correctly, spouses should consult an experienced attorney.
Removing a Spouse Without Refinancing
In a loan assumption, a lender may remove one spouse’s name from a joint mortgage without refinancing. Although this is simpler than refinancing, lenders rarely agree to loan assumptions.
Loan assumptions may also incur an additional cost (usually 1 percent of the loan and lender’s fees).
FAQs About Removing a Spouse’s Name from a Home Mortgage
What qualifications do I need to refinance a mortgage?
Although guidelines may vary by lender, a spouse may need to have a credit score of at least 580 (with FHA loans) or 620 (with VA and conventional loans), debt to income ratio below 45%, and a steady source of income and employment.
Related: Housing Discrimination Laws in California
Is signing a quitclaim deed enough to release a spouse from a home mortgage?
No, a quitclaim deed may release a spouse’s interest in the home but it does not release the mortgage.
Why is it important to release a spouse from a home mortgage after divorce?
Staying in a home mortgage can affect a spouse’s credit score in the case of loan default and leaves ex-spouses with joint financial responsibility.
Why is it so hard to get a lender to agree to a loan assumption?
For a lender to agree to loan assumption, a spouse must be able to handle the mortgage agreement individually. Lenders may be skeptical to make this assumption.
What if I can’t refinance the loan?
If refinancing and loan assumption fails, selling the house can allow a spouse to pay off their loan.
What if my name is on the deed but not the mortgage?
If a name is on the deed but not the mortgage, refinancing is not an option. To be responsible for the debt, the name must be on the mortgage.
Can I be a cosigner on a mortgage if I already have one?
Yes, it is possible to be a cosigner on two loans. However, lenders are more likely to approve a loan when an individual has high-income and good credit.
Is there a reason to refinance even without divorce?
Yes, if one spouse can get a better mortgage rate by refinancing themselves, it may be helpful to remove a spouse from the deed.
Related: Reimbursement for Separate Property: CA Family Code 2640
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If you a loved one would like to know more about how to remove a spouse’s name from a home mortgage, get your free consultation with one of our divorce attorneys today!