Arizona Divorce | Can You Remove Your Name from the Mortgage?
The Quick Answer is: Probably not, but read on.
Arizona Divorce | Does the Existing Mortgage Loan Have an Assumable Clause?
If you want to remove a name from an existing mortgage loan the mortgage loan must have an assumable clause. Most mortgages today do not have an assumable clause.
If your existing mortgage loan does not have an assumable clause there is nothing you can do about taking your name off of the existing mortgage loan.
The existing loan will need to be refinanced, or the home will need to be sold to a new buyer in order to remove a name from the responsibility of the existing mortgage.
Existing Mortgage Loan Without an Assumable Clause
In a divorce situation, if one of you is keeping the house and the existing mortgage does not have an assumable clause, the former spouse (the one who is keeping the house) will need to refinance the home loan into their name in order to remove the other spouse (the one who is leaving the house) from the existing mortgage.
Refinancing the house, or selling the house is the only way to get both names off of the existing mortgage.
If refinancing the home is not possible it is best to sell the house, split the equity and move on to the next chapters in your life.
Your Existing Mortgage Loan Does Have an Assumable Clause
If your existing home loan does have an assumable clause and you want to remove a name from the mortgage the person keeping the house must have the ability to qualify for the home loan on their own in order to assume the mortgage on their own, removing the other person from the loan.
VA Loans With An Assumable Clause
Some VA home loans have an assumable clause, but often, the assumable clause states that only another Veteran can assume the mortgage loan, and they must also qualify for the loan.
What About a Novation Clause?
Some mortgages have a clause called a Novation clause. Don’t be concerned about this fancy word, it’s just another word for ‘assumption.‘
First, in a novation, the existing loan must have an assumable clause. Most mortgage loans today do not have an assumable clause.
Remove and Replace With an Assumable or Novation Clause
Let’s say that your former spouse (who kept the house in the divorce) has a new spouse. The new spouse wants to remove you from the existing mortgage and replace you with themselves. (Everyone stand and sing Halleluiah!)
The new borrower (new spouse) will need to sign the new mortgage documents, and then the former spouse who wants off of the loan can be released.
Of course, the new person who wants to be on the mortgage must also qualify for the loan.
Quitclaim Deed – Be Very, Very Careful!
One way to remove a person from any legal interest in a house is with the signing of a Quitclaim Deed.
However, by you signing a Quitclaim Deed this does NOT, (HELLO, ARE YOU READING THIS?) does not remove you from the responsibility of the mortgage, you will only lose any say-so to the property.
After you sign a Quit Claim Deed you will still be personally responsible for any existing mortgage loans on the house.
Please know that by signing a quitclaim deed on the property you can place yourself in a very dangerous position, and it can ruin your credit for decades.
Would Our Free Initial Consultation Help? Click Here
What I Do:
1. I help people who own a home together, and plan to separate and/or divorce, avoid making very expensive and long-lasting mistakes with their co-owned home.
2. Although my information can help anyone who plans to divorce, it is best suited for those who are not contesting the divorce (too much) and are as amicable as possible.
How Do I Do This?
1. I'll consult with my clients and compassionately help them completely understand all of their options with the home.
2. I'll explain the option of one person keeping the home and refinancing the home, so the former spouse is no longer on the mortgage loan.
3. I'll explain the option of selling the home and splitting the equity, and then each person having the option to buy a new home on their own.
4. I'll explain why an appraisal-minus-the-mortgage does not equal true equity, and why a home inspection (sometimes called house due diligence) is very important at this time.
5. I'll explain to my clients how their decisions with respect to the home will impact their quality of life for many years to come, positively or negatively.
6. I'll explain how the information I can provide will help my clients make better decisions for their future.
7. I'll explain how my clients can avoid making expensive and long-lasting mistakes.
8. I'll introduce my clients to other professionals, such as mortgage professionals who can better explain the refinancing and new purchase options.
9. I'll explain my discounted commission rates that I offer my clients if they choose to sell the house and choose me as their REALTOR®.