How to Remove a Name from a Joint Mortgage
For married couples, a joint mortgage is usually how they purchase a home. If a divorce occurs or a cosigner has to be a part of the loan to get it approved, there may be instances where needing to remove a name from a joint mortgage becomes necessary. Removing a name is not always an easy task, but it can be done. Most of the time, a refinance will remove a person from a loan.
Refinancing the Loan
This will be the only way to get the name remove from the joint mortgage. The person who wishes to remain on the mortgage will have to obtain the loan alone, so it is important that they have good credit history without the joint applicant's credit being considered. If the credit score is not satisfactory, or if the mortgage is more than the home is worth, there may be some issues with getting a refinance loan approved.
Also, the person that remains on the mortgage must be able to qualify for the mortgage with their income alone. A lender will examine their debt to income ratios to determine eligibility.
What if the Bank Denies the Refinance?
If the refinance loan is denied through the current lender, try other lenders. Depending on the situation, you may be able to find one who will agree to refinance the loan. If you are having trouble getting a lender to approve the refinance, you can always approach the lender and ask that the name be removed. Though it is highly unlikely that the lender will do so, because the more names on the mortgage, the more people they can hold liable in the event of foreclosure, some banks are willing to look at the situation and remove one spouse's name from the loan. The refinance may require a larger down payment since it will remove liability from one person.
What if no one will refinance?
If there are no lenders willing to refinance, the only thing you can do is leave both names on the mortgage. As long as the party maintaining the mortgage continues to make payments on time, your credit score will continue to rise. In the case of divorced parties, this helps the other person establish credit independently of their ex-spouse. If the other party cannot or does not make the payments, however, you could become responsible for the loan, so it is important to work out an agreement to protect yourself as best as possible. Most of the time a legally binding agreement is required to protect yourself.
Be prepared to make the payment on your own, or at least help with the payment to prevent the loan from going into foreclosure and wrecking havoc on your credit. It may be best to wait until the housing market picks back up and see if there is any increase in equity. This will make it easier to refinance with a lower down payment.
Remember, your ex-spouse will have to continue making payments if he or she wants to continue living there. While it may be spiteful to refuse payments and ruin your credit, the spouse will render also damage their own credit. However, uncooperative ex-spouses are something that is very commonly seen so prepare yourself for the worst if you are in this situation. If for any reason the spouse staying in the home does not want to make the payments, that spouse could move out and allow you to make payments while living there.