Financing in El Paso>Question Details

Matthew, Other/Just Looking in El Paso, TX

Going through divorce, can I get my name off of loan this way...?

Asked by Matthew, El Paso, TX Mon Aug 25, 2008

Wondering if I can have lender take my name off of loan and replace it w/ the parents of soon-to-be-ex-spouse?
I am not asking for any pay out or money, just keep the loan as is. I'd like for the payments to essentially remain the same, whereas refinancing will cause them to go up b/c we've only had the house about 1.5 years.

Any advice???

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Answers

5
Very tough. You do need to take care of this in the divorce. Likely you will want your x to refinance.....however that is to be accomplished you want it done quickly. You do want off the loan as it could keep you from purchasing a home in the future, depending on your income, debts, etc. Make sure you use an attorney in the divorce. Your attorney should guide this for you. Believe me I've worked on these before and whatever you have to do to get your name off NOW is what you want to do. Even if you have to sell the house and loose money now. Otherwise you may get a ex-in-law living in a house with your name on the mortgage and be responsible for it and that's never any fun. You might end up paying for him to live there until the loan is paid.
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0 votes Thank Flag Link Wed Aug 27, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Lending answer:

First question: Is your current loan assumable (such as an FHA insured mortgage) or does your mortgage or Note contain a "Novation" clause? If so, you can approach your lender about switching out borrowers. An application from the new borrowers plus a copy of the divorce decree and marital separation agreement will be required.

Second question: Have you called your lender to ask? If your mortgage or Note aren't FHA insured or lack a Novation clause, then you'll need a loan modification. The modification will add a Novation clause, allowing you and the lender to swap out your ex-spouse in favor of a new borrower. The challenge will be the occupancy type - your ex-spouse is currently an owner-occupied co-borrower; her parents as a substitute borrower will be non-occupying co-borrowers... which is a significant change in loan terms and not easy for the lender to grant.

Third question: Does your divorce decree (as it stands now) REQUIRE you to refinance to remove your ex-spouse? If so, you're most likely stuck with refinancing. If NOT (which is the usual blunder most attornies makes) your ex-spouse will still be obligated to pay the mortgage whenther you pay it or not. Some lenders will remove an ex-spouse from a Note if the spouse who gets the house can demonstrate qualifying ability to repay without the assets and income of your joint marriage estate (ie by yourself).


If the three items above fail, then you're left with a refinance as the posters below advise.
0 votes Thank Flag Link Tue Aug 26, 2008
The note always supersedes the divorce decree and, unfortunately, the bank will not take your name off of a loan unless it is refinanced.
0 votes Thank Flag Link Mon Aug 25, 2008
You will have to pay closing costs again to change the borrower information. It will be similar to refinancing. Everyone has to apply again, etc. I understand what you want and it makes sense to guys like you and me, but it just doesn't work that way. This is one of the reasons that divorce is very difficult. Sorry.
0 votes Thank Flag Link Mon Aug 25, 2008
In order to remove anyone from the loan a refinance will be required. There is no way of switching out or replacing borrowers.
0 votes Thank Flag Link Mon Aug 25, 2008
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