REMOVING YOUR NAME FROM YOUR MORTGAGE

Removing Your Name From A Mortgage

Your lender is unlikely to remove your name from the loan voluntarily. Mortgage contracts are written to make it difficult or impossible for the parties to change the terms or conditions. Why? The mortgage originator estimated the risk for the loan based on, in the case of a joint mortgage, both borrowers’ credit scores, incomes, and debt-to-income ratios. With only one person responsible for the loan, the lender is in a riskier position.

If you owe more on the home than it is worth, it’s even less likely the lender would remove your name from the note, as the lack of equity increases the probability that you and your co-borrower will default on the mortgage. Even though your co-borrower may have every intention of keeping the loan current, the lender will want as many people as possible liable for the loan so that it has a higher chance of collecting on any deficiency balance that results in case of default and foreclosure. 

So what should you do? Shop around for a loan.  While your current lender may not be willing to refinance your loan, you may be able to find another bank willing to lend you the funds needed to refinance. Finding a loan in today’s market can be difficult. However, contact several lenders to find out what options, if any, they offer. But know that it is unlikely you will find a lender willing to lend you more than the home is worth. Because you are upside-down on your current mortgage, you may need a large down payment available in order to obtain a refinance loan. In addition, you will need to compare the terms of your current loan with those of any refinance offered to make sure that the new terms are competitive with those of your previous loan.

There are other options to remove liability for a co-signed or joint loan such as, filing for bankruptcy, selling the property in question, which will extinguish the loan liability, unless there is a deficiency balance, for which you may be able to get the bank’s permission to do a “short sale”, or allowing a “strategic default”.  

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