A mortgage loan obligates the borrower to monthly payments until the loan is repaid. In many cases, this can span 30 years or more. Life happens. Things change and sometimes a borrower wants to be relieved of this obligation. In situations where there has been a divorce, breakup or just a desire to no longer share the mortgage, a borrower’s name needs to be removed. However, lenders rarely, if ever, allow a lender to simply walk away from the contract. For borrowers who wish to be removed from a mortgage, there are only a few options.
Ask the lender for a loan assumption. Under a loan assumption, the lender simply removes the borrower’s name. These occurrences are extremely rare, but have the best chance when all payments on the mortgage are current and the single borrower meets income and credit criteria. Lenders may charge an application fee and service fee to execute a release of liability. If a lender does not approve a loan assumption, borrowers in good standing who have good credit can sometimes threaten to refinance with another lender to encourage cooperation.
Sell the property. The easiest way to have a name removed from the mortgage is to sell the property and pay the outstanding balance. This satisfies the terms of the contract and relieves all borrowers from any obligation to service the debt. If the revenue from the sale does not cover the mortgage in entirety, borrowers must pay the difference out of pocket. Borrowers can also pursue a short sale and negotiate with the lender to relieve them from liability for the difference.
Refinance the property. If a co-owner wishes to keep the property, he can refinance under his name only. To successfully refinance, all owners must agree in writing, the home can not be underwater and the single owner must have the income and credit to qualify alone.
Based in Washington, D.C., Jeremy Watson is an engineer and urban planner. He has been involved with urban design, city infrastructure and business since 2008. Watson holds a Bachelor of Science in civil engineering from the University Florida, as well as a Master of Science in urban and regional planning from Virginia Tech.