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Mortgage facts 2018 - How can you remove your name from a mortgage?

Mortgage facts 2018 - How can you remove your name from a mortgage?

Mortgage facts 2018 - How can you remove your name from a mortgage?

Most of the time mortgages on properties are listed in the names of two people. But there are people who want to revoke their names from the mortgage due to different reasons. This issue may appear at the time of a divorce, or when legal partners are separating their ways from a partnership, etc.

Removing names from a mortgage contract require fulfilling specific conditions.

So, as an individual, you should know the ways you can remove your name from a mortgage.

1. Refinance the mortgage

a. First, check if the person listed on the mortgage can be approved for refinancing the house.

If one partner refinances the loan in his/her name, it will remove the other partner from the mortgage. The refinancing partner must show his/her sufficient income to the lender to assure that he/she can make the monthly payment and pay the refinancing cost.

b. Existing parties can apply for refinancing with the same lender.

The parties should submit an application to the lender that they want to refinance the loan. The willing party must attach items such as his/her pay stubs, credit card statements, tax returns, bank details, and documentation of other loans, if any. The lender will also verify the willing party’s credit score and history.

c. Get the approval of refinancing from the lender.

The lender will inform both the existing parties if the refinancing is approved. The parties need to consult an attorney and close the deal. The attorney will verify the genuinity of those documentations and draft them properly. The attorney must also make sure that the second party is no longer listed on the mortgage or in the property records. Both the parties must collect copies of these records for future references.

d. Seek out other potential lenders if your existing lender denies.

Partners can apply to other lenders for refinance, for example, different commercial banks or different lending institutions. People must remember that most of the lenders will ask for similar documentation as the existing lender did. But there are few lenders also who can evaluate your refinance application with a lenient approach.

2. Selling your property to a third party

You can sell off your home and remove your name from a mortgage being a co-borrower.

a. If you and your partner are in a mortgage deal as co-borrowers, first you need to obtain the approval and set up an agreement with your co-borrower, to sell off the house to another party.

By selling off the house to a third party, not only yours but your co-borrower’s name can also be removed from the mortgage. Actually being the primary borrowers, you are paying off your mortgage debt by using the sale money.

b. Before selling of the property, it is wise to verify your property’s value with a real estate agent. If your home is worth enough to cover your existing mortgage, selling the house will make sense. But, if your loan value is greater than your current property, you may negotiate a short-sale with your lender.

Normally lenders want to avoid a short sale, as it’s a loss to their investment (selling of the property for less than what you owe to them). But if your lender agrees to a short sale, you’ll be released from your debt burden completely.

c. Hire a professional real estate agent and accept an offer suitable to you.

A professional real estate agent will list the property for you as well as assist you to negotiate a better deal with the prospecting buyer.

You can also sell the house without taking help from a real estate agent. The property will be listed as a “For sale by owner”.

d. Consult a real estate attorney to close the deal.

The attorney will help you to verify the sell documentation. He or she will also check that your name is totally removed from the mortgage or the property records. Make sure you get all the copies of these records for your future references.

3. Obtaining a Release of Liability

a. Call your lender and ask for a Release of Liability.

A Release of Liability is a declaration which will release you from the liability of paying the mortgage. Your name will be removed from the mortgage contract. The partner, who will be liable for the mortgage, must convince the lender that he/she has a steady income and is able to handle all the mortgage payments alone.

b. Submit required documents to the lender along with the remaining partner’s income proof, credit report, bank statements, and tax returns.

The lender will also check the credit history and score to verify the partner’s affordability.

c. Receive the Release of Liability documentation from your lender.

Don’t forget to read the Release of Liability properly; it must ensure that you are released from all the liability about that mortgage. It is advisable to contact an attorney and review the documents through him.

A real estate attorney may also help you to prepare and file the documents of property records transfer from your name to the new buyers.

To be continued...

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