How to Get Someone Off a Joint Mortgage

When individuals co-own property, circumstances can change, leading to a need to adjust financial arrangements. Events such as a divorce, the dissolution of a partnership, or shifts in personal financial situations often necessitate removing one party from a joint mortgage. This process primarily involves releasing an individual from their financial obligation to the mortgage lender. This action is distinct from merely removing someone from the property’s title, which pertains to ownership. The objective is to ensure the departing individual is no longer responsible for the mortgage debt.

Refinancing the Existing Mortgage

Refinancing is a direct and frequently utilized method for removing a co-borrower from a mortgage obligation. The process involves securing a new loan in the name of the remaining borrower, which then pays off the existing joint mortgage. Before applying, the remaining borrower must meet specific qualification criteria, including creditworthiness, sufficient income, and an acceptable debt-to-income (DTI) ratio.

Lenders typically look for a minimum credit score, which can range from approximately 620 for conventional loans to as low as 580 for FHA-backed options. Higher scores generally result in more favorable interest rates. The borrower’s income must demonstrate the ability to manage the new mortgage payments, supported by stable employment.

Lenders assess the debt-to-income ratio, which compares monthly debt payments to gross monthly income. While a DTI ratio below 36% is preferred, some lenders may approve loans with ratios up to 43%, or even 50% for certain government-backed loans if compensating factors exist. The property’s appraised value also plays a role in determining the loan-to-value ratio for the new mortgage. Gathering necessary documentation prior to application can streamline the process.

For the refinance application, a comprehensive set of documents is required to verify financial standing. This includes:
Photo identification.
Authorization for a credit report pull.
Proof of homeowners insurance.
Income verification, such as pay stubs from the last 30 days, W-2 forms from the previous two years, and tax returns for the past two years.
Asset statements, including bank statements from the last two months, and statements for investment or retirement accounts.
The existing mortgage statement, property deed, and current property tax statement.

Once the application and documents are submitted, the refinancing process moves through several stages. A new appraisal of the property confirms its market value. The loan then enters underwriting, where the lender evaluates the application, credit, assets, and the property itself. This process can take 30 to 45 days.

Upon successful underwriting, a conditional approval is issued, followed by final approval. The final step is the closing, where the remaining borrower signs new loan documents. The funds from the new mortgage pay off the original joint mortgage. This payoff legally releases the departing co-borrower from their financial obligation to the lender.

Selling the Property

Selling the property offers a comprehensive solution for removing all parties from a joint mortgage, as the transaction resolves the outstanding debt. An initial step involves understanding the property’s current market value to determine a realistic selling price. Assess if the anticipated sale proceeds will cover the remaining mortgage balance and all associated selling costs. This evaluation helps prevent a situation where additional funds are needed to close the sale.

Preparing the property for sale involves addressing necessary repairs or cosmetic improvements to enhance its appeal and marketability. Engaging a real estate agent is common practice to facilitate the selling process. Real estate agent commissions range from 5% to 6% of the home’s sale price, split between the listing agent and the buyer’s agent. These commissions, alongside other closing costs, are deducted from the sale proceeds.

The procedural aspects of selling begin with listing the property and conducting showings for prospective buyers. Once an acceptable offer is received, a purchase agreement is executed. Sellers continue to be responsible for mortgage payments until the sale is finalized. At the closing, the proceeds from the sale are disbursed. The existing mortgage is paid off directly from these funds, along with any other liens, closing costs, and real estate commissions.

Seller closing costs, beyond real estate commissions, can range from 1% to 3% of the sale price. These costs may include transfer taxes, attorney fees, title insurance, and escrow fees. Any remaining funds after all obligations are satisfied constitute the net proceeds for the sellers. This complete payoff of the mortgage at closing releases both borrowers from their liability.

Mortgage Assumption and Lender Release

Mortgage assumption presents a less common, but viable, alternative for removing a co-borrower. This option allows a new party, or the remaining borrower, to take over the terms and balance of the existing mortgage.

Not all mortgages are assumable. This feature is found with government-backed loans, such as those insured by the Federal Housing Administration (FHA), guaranteed by the Department of Veterans Affairs (VA), or backed by the United States Department of Agriculture (USDA). Most conventional mortgages include a “due-on-sale” clause, which requires the loan to be paid in full upon the transfer of property ownership, making them non-assumable without specific lender consent.

For the remaining borrower to qualify for an assumption, they must meet the lender’s criteria, similar to those for refinancing, including credit score, income stability, and debt-to-income ratio. The lender evaluates the new applicant’s financial capacity to ensure they can independently manage the mortgage payments. Merely taking over payments does not release the original borrower from liability. A formal lender release is necessary to remove the departing party from their obligation. Without this release, the original borrower remains financially responsible for the debt.

The process for initiating a mortgage assumption involves contacting the current mortgage servicer to determine if the loan is assumable and what requirements apply. The remaining borrower then completes an assumption application, providing financial documentation for review. The lender undertakes an underwriting process to approve the assumption.

If approved, formal documentation is signed to transfer the mortgage liability to the qualifying borrower. This documentation outlines the new terms and the release of the original borrower. Fees may be associated with the assumption process.