Even if a divorce contract says that your ex is responsible for the debt, lenders can still collect from each person who applied.
There are a few ways to take someone's name off a loan. Start by asking your current lender about changing the loan. If so, anyone whose names remain will need to re-qualify for the loan on their own. That means if you want to keep the loan without your partner, you'll need enough income and a high enough credit score to convince the bank that you can make payments each month, without fail, until the loan is paid off. Also, you may need to go through an application process like the one when you first obtained the loan.
If your lender approves your request, they may release the other person from any liability for the debt often used in cases of divorce. If your current lender doesn't help you, try refinancing the loan. This simply means you apply for a new loan and use that loan to pay off the old debt. The person who signs the new loan should apply individually, and they need enough income and high enough credit scores to qualify for the loan. Other lenders might be more willing to approve a new loan, and you might be able to get help from programs like FHA loans which have more relaxed standards when it comes to the size of your down payment and credit scores.
To see whether a new, refinanced mortgage could work for you, check out our mortgage calculator. Refinancing may be off the table when your home is worth less than you owe—or if you have don't have enough equity in the home. Most lenders require that you fall within certain loan-to-value ratios. Simply put, this is a way to measure how much is owed on a home, compared to its market value; or in other words, how much cash the bank stands to lose if you default.
The good news is there are government programs in place that might help you get a new loan. Before you go through the whole process, check first to see whether you can get the loan refinanced under the name you want. You might be able to transfer a mortgage to another person, especially if that person is already planning to buy the house. Some mortgages are assumable—meaning simply, someone else can assume the loan; however, most are not. Selling a house that carries a lot of debt with it can be tough, and the struggle can disrupt you and your loved ones.
Review your options with care and get help from local real estate agents before you go that route. All of the options above involve fees , so look closely at all of your options before choosing, and decide ahead of time who will pay the fees. Even if you choose to sell the house and you make some money on the sale, real estate agent fees and other costs will count against your profit.
Of the options listed, a release of liability or a loan assumption are the cheapest, because they avoid the closing costs that come with refinancing. All of the above is also true for co-signers on a mortgage. Talk to the person you first signed the loan with about their options, and don't forget that their future is tied to yours.
With some loans e. Most home loans do not offer the same features. With a quitclaim deed , the owner passes the title of a home to someone else, for legal or other reasons. This kind of deed does not remove someone's name from a mortgage; all rights of ownership are transferred, but loan contracts remain unchanged, and the person who first signed the loan still owes that debt.
A short sale can be useful if the home is worth less than the loan balance. With this technique, the homeowner gets the lender to agree to let the home be sold for less than the loan balance. Then the lender accepts the proceeds in payment of the loan.
And in some states the lender can sue you for the shortfall. Sometimes a homeowner can rent the home for enough to cover the mortgage payment.
This can be viable in a strong rental market or when you took the loan out so long ago that rental rates have had time to rise beyond the mortgage payment. A rental also can be accomplished fairly quickly, may not require expensive repairs to your home, needs no lender approval and, importantly, lets you remain a homeowner. On the downside, renting requires finding another place to live.
It can be a good choice if you have enough income to pay rent on a cheaper place or can move in with relatives. The process of foreclosing is costly and long, and many times lenders would prefer to cut borrowers a break if it will keep them in the home and making payments. They can do this by modifying the loan, reducing the interest rate, extending the term or even forgiving principal. If a loan modification reduces the monthly payment enough that you can cover it, both parties can get what they want.
Finally, you can simply walk away. Rather than simply disappearing, however, tell the lender what you are planning. The lender may suggest one of the alternatives above as a better option. Depending on the solution your lender offers, the outcome can be seriously negative—not being able to buy another home for years after foreclosure—to not bad at all—a loan modification that lets you stay where you are with a smaller payment.
Mark Henricks has written on mortgages, real estate and investing for many leading publications. He works from Austin, Texas, where he engages in songwriting, wilderness backpacking, whitewater kayaking and triathlons when not reporting on personal finance and small business.
Select Region. United States. United Kingdom. Mark Henricks, Mike Cetera. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. Sell Your House One of the best and fastest ways to get out of a mortgage is to sell the property and use the proceeds to pay off the loan. Turn Over Ownership to Your Lender Another option is to voluntarily turn over ownership to the lender in order to avoid foreclosure.
Let the Lender Seek Foreclosure Pandemic forbearance has blocked foreclosures on government-backed loans. Seek a Short Sale A short sale can be useful if the home is worth less than the loan balance.
Replacing someone on your mortgage with someone else If you want to remove someone from your mortgage and replace them with someone else — a family member, friend or a new partner — you can do this with a transfer of equity. Get Started. How can you buy a partner out after separation? Read more. Getting a Mortgage as a Single Person Read more. Our Calculators Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.
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