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Posted: Fri Jul 03, 2009 7:56 pm Post subject: novation instead of refinancing?

I have recently heard of something called Novation and am wondering if it is something that might solve my problem. I now own a home with my soon to be ex-girlfriend and she is trying to find a way to refinace the home that we collectively own, and then I can move out. Since that doesn't seem to be happening; she doesn't make enough money to take over the entire mortgage herself, but has a grandmother who is willing to co-sign a loan with her (and has excellent fiances/credit to do so.) Question: if the mortgage compay gave permission and the grandmother was willing to take over my obligations of the loan......could a Novation be the better way to go rather then waiting for a refiance mortgage to take place? Is a Novation easier? Is it less money to do the paperwork? will it work for the situation that I am now in? If a novation works, then I will at the time of closing......sign a quitdeed for my portion of the property to my ex-girlfriend. Thanks for your help ahead of time. John

jenkin7 · Posted: Sat Jul 04, 2009 1:52 am Post subject:

Hi Guest,

A novation is no doubt an easy way to get rid of the mortgage liability. But doing a novation isn't going to be easy. Your lender has to approve of it. The person who is goint to replace the original borrower has to have a very good credit. Otherwise, the lender will not allow the novation to take place.

Since your girlfriend's grandmother has excellent credit and income, the lender may not have problem in doing the novation agreement. Once the novation is done, you can quitclaim your share of property to your girlfriend. However, most lenders would want your girlfriend and her grandmother to refinance the loan in their names.

robertsmith2005 · Joined: 22 May 2009 Posts: 338 -0.48 Dollars($)

I think the best way will be to try for novation, as doing a refinance may cost you more. You will have to pay all kinds of loan fees and closing costs in case you cannot refinance with the same lender. And, you will also have to shop around for suitable rates and terms in case you cannot make the deal with the previous lender.

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novation instead of refinancing?