How do you remove someone from a mortgage?
While it is possible to remove someone from a mortgage, it is a very challenging process and there are several points to keep in mind. Removing someone from a mortgage is the same as modifying a loan which means you are changing a legal document that has been recorded by your local government.
Most important, your lender must agree to the modification which they may not be willing or able to do. If your lender is not willing to modify your loan then the only way to remove the borrower is to refinance the mortgage.
To understand if a loan modification is possible, you need to determine if your lender still owns your mortgage. In many cases, lenders sell your loan to a third party such as Fannie Mae or Freddie Mac and then your loan is packaged into a mortgage-backed security.
In this scenario, although you may make your monthly payment to your lender, they are only servicing your loan and do not actually own the mortgage. If your lender does not own your loan, it can be highly challenging if not impossible to remove a borrower.
If your lender does own your loan, they must agree to the modification which they may be unwilling to do because it may increase the risk of default. In short, having two people responsible for a mortgage is usually perceived to be better than one person. A mortgage with a sole borrower relies on one person and one income source to repay the loan as compared to a mortgage with co-borrowers that offer two potential income sources.
Your first step is to contact your lender and determine if they are willing to remove the borrower from the mortgage and understand how the process works. While most lenders decline these requests, it does not hurt to ask.
If your lender is willing to remove the borrower -- which again is unlikely -- then you must demonstrate your ability to afford the loan on your own. Similar to applying for a mortgage, the lender reviews your income, debt, credit profile and employment to make sure that you have the ability to repay the loan as a sole borrower. If you cannot qualify for the loan own your own, the lender is highly likely to refuse your request to remove the other borrower.
Another point to keep in mind is that the lender may charge a fee to process the loan modification. Be sure that you pay the fee when the modification is completed and not upfront.
Finally, if you meet the requirements outlined above -- the lender owns your loan, approves your request to modify the loan and remove the other borrower and you qualify for the loan on your own -- the last step is that other borrower must transfer their ownership interest in the property to you.
This can be done by filing a quit claim deed or similar legal document with your local government. Although filing a quit claim deed is a relatively standard process, it requires the participation and consent of the other borrower / property owner. If the other borrower is unwilling to relinquish their ownership interest in the property then you cannot remove them from the mortgage.
A common scenario when you may want to remove someone from a mortgage is following a divorce when one person receives full ownership of the property and is solely responsible for the loan. In this case, the ex-spouse who no longer owns the home usually wants to be removed from the mortgage so the loan does not impact their credit report or debt-to-income ratio if they apply for another loan.
Although you still need to request a loan modification, the lender may be more willing to remove an ex-spouse from a mortgage if the person who retains the property following the divorce has made the monthly mortgage payments on time for at least a year. Additionally, in this situation the lender usually requires a divorce agreement or decree that shows that the person staying on the mortgage holds full ownership of the property and is responsible for the loan. Although there is no guarantee that the lender grants the request to remove the ex-spouse from the mortgage, it may be more likely if you satisfy these requirements.
If you cannot modify your existing loan for any of the reasons highlighted above, your other option for removing the borrower is to refinance the mortgage. In this scenario you take out a new loan without the other borrower and use the proceeds to pay off and eliminate the existing mortgage.
If the other borrower holds an ownership stake in the property they still need to transfer their ownership or approve the refinance but this may be a more feasible option than modifying your existing loan.
The table below shows mortgage terms for lenders in your area. If you decide to pursue the refinance option, we recommend that you contact several lenders to review your situation more closely.
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