Getting Out Of A Joint Mortgage With Someone
What happens if youre in a joint mortgage with someone and you need to get out? Unfortunately, there is no easy answer. If you and your co-borrower cant come to an agreement on how to pay off the mortgage, the lender may foreclose on the property. So no matter what, try to work something out.
See if the other person can buy you out or see if they are open to selling the property. And if you need help discussing and making a plan, find an attorney that can provide legal advice and help mediate.
Other Considerations When Getting A Home Equity Loan
If you think youre ready to use your home equity, keep the following in mind:
- Home equity rates are relatively low. HELOC and home equity loan rates are much lower than those for credit cards and other types of loans, and they might be easier to qualify for. This is because home equity loans are secured loans, meaning your home is the collateral.
- Home values can fall. One reason to be careful with home equity loans is that home values fluctuate. If you take out a big loan and the value of your home drops, you could end up owing more than what your house is worth. This is known as upside-down or underwater. The housing crash of 2008 left millions of borrowers stuck in homes they could not sell because the value of their homes sank and their mortgage amounts were more than their homes were worth.
- Your house is on the line. If you bought your house or refinanced when rates were low, you have to ask yourself how wise it is to do a cash-out refinance, especially if the rate youre now borrowing at is considerably higher than that of your existing mortgage. If you fall behind on payments, youre at risk of foreclosure.
When Walking Away Makes Sense
Prior to the national housing bubble of the late 2000s, real estate prices could generally be counted on to increase over time. While a few geographical regions would occasionally see declining values, on a national basis, homes gained in value over time. Up until this point, this had been the long-term trend in the U.S.
However, in 2008 and 2009, property values plunged . As 2009 came to a close and the year 2010 opened, 23.1% of all mortgages nationwide were underwaterthe amount owed on the mortgages was greater than the value of the homes. At this point, what was previously unthinkable to some actually occurred: Borrowers who could still afford to make their mortgage payments decided not to do so.
If you can rent a similar-type house for less than the cost of the mortgage, some experts suggest that walking away from a house is a sound financial move. In a scenario where you are underwater on your mortgage and facing rising interest rates , the incentive to walk away may be even more appealing.
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Review And Keep Your Records
Review all letters, emails, and statements when you get them from your mortgage servicer. Be sure their records match yours. Most servicers must give you either a coupon book or a statement every billing cycle . Servicers must send periodic statements to all borrowers who have adjustable rate mortgages, even if they decide to send them coupon books.
Your coupon book or statement will have your servicers contact information. That way, you can learn more about your account, get an explanation of a charge, or confirm that theyre crediting your payments properly and on time.
If your statement is late even by just a few days call the mortgage company to track it down in case theres a problem with your account. If your account shows that youre paying late, you could be in default on your loan. Late payments and a default are reported to a credit bureau and will appear on your credit report. That could affect your ability to get credit in the future. Get an explanation for anything you dont understand.
If you get a notice that your servicer has changed, call your current servicer to confirm the new mortgage servicer before you send in your next payment. This will make sure your payment goes to the right servicer, avoid delays in processing, and can help you avoid a scam.
Put More Toward Your Mortgage
The single most effective way to increase your home equity is to pay off your mortgage faster. If you cant afford to pay off your remaining mortgage in full, try making larger monthly payments, or even just a few extra payments per year. Not only will that help you build home equity faster youll also save thousands of dollars in interest. Before you do this, check with your mortgage lender to make sure there isnt a penalty for paying your mortgage off early.
- How this affects equity in your house: Making extra payments to your mortgage principal is the most straightforward way to increase your home equity. Every dollar you pay early toward your mortgage is one dollar of home equity increased.
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What You Dont Know About Terminating Purchase Agreements
A recent Discover Home Loans survey indicated that 63% of prospective home buyers are overwhelmed by the amount of information available on home financing. To simplify the situation, this four-part series provides a one-stop-shop for information related to home purchase agreements.
How to Fire Your Lender, Broker or Real Estate Agent
You have the right to terminate various agreements and relationships as you move through the homebuying process. Lets take a quick look at the three most common relationships youll enter and your options for taking a step back.
Remember, certain agreements will come with cancellation fees and penalties, but these pale in comparison to the cost or emotional anguish of getting stuck with a home you dont want. Your homebuying partners should always let you know before you reach a point of no return.
If youve entered into a home purchase agreement, different rules apply.
Terminating Your Mortgage Application
If you need to cancel a pending mortgage application, call your loan officer or broker immediately. In most cases, you have a three-day window to cancel the application and recover any paid fees.
Tell the lender you want to cancel the pending application and provide a reason. Explaining the situation will help the lender understand any future needs.
Ending a Buyers Agent Agreement
Protecting Yourself
Did you know?
Refinance Your Reverse Mortgage
Another option is refinancing out of a reverse mortgage into one with better terms. For example, if interest rates have decreased significantly since taking out your reverse mortgage, or your homes value has increased, and you would qualify for a larger loan amount, it might benefit you to refinance your reverse mortgage. With this path, a new reverse mortgage loan replaces the current one.
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Option : Sell Your House Through A Short Sale
Another way out of an underwater home is a short sale, in which you try to sell your home on the open market for whatever you can get, and ask your lender to forgive the amount of the mortgage beyond the sale price.
Lenders might approve a short sale to avoid the expense and hassle of a foreclosure, but they can also reject it. Also, dont be fooled by the name: Short sales are complicated and can take a long time to complete. Youll need an experienced agent to increase your chances of success of finding a buyer and getting bank approval.
How To Get Out Of A Joint Mortgage
The best option for getting out of a joint mortgage depends on whether one party wants to stay in the home. If neither does, you can simply sell the property and walk away with a split of the proceeds.
In some cases, though, one person may plan to stay in the house when the other moves out. If you get divorced and both you and your former spouse are on the mortgage, the person staying can refinance the loan to remove the co-borrowerâs name. Keep in mind that youâll have to qualify with your own income if you refinance by yourself, said Melissa Zavala, a broker at Broadpoint Properties in San Diego.
You may hear of the option to use a quitclaim deed, which transfers a personâs share of a property to another individual. However, this does not remove your name from the mortgage or release you from the responsibility to make payments.
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Why Remove Your Exs Name From The Mortgage
You and your ex-partner might agree on who will keep the house and take over the mortgage payments.
But to a lender, youre both still on the hook for loan repayment until your spouses name or co-borrowers name has been taken off the mortgage and deed.
As far as lenders are concerned, both people remain jointly and severally liable for the loan. In other words, the lender can come after either or both of you in the event of a default. And both of your credit scores will take a hit if your payment is late.
The only legal way to take over a joint mortgage is to get your exs name off the home loan.
The same goes for a co-borrower who no longer wants to be on the line for a mortgage they co-signed. If you find yourself in the position of needing to remove your name, or someone elses name, from a mortgage, here are your options.
Warning: A Quitclaim Deed Does Not Take Your Name Off The Mortgage
Note that signing a quitclaim deed surrendering your interest in the property does NOT remove you from the mortgage. You will still be responsible for the entire debt if your co-borrower fails to make payments, resulting in a notice of default or notice of sale on the trust deed, commonly referred to as a mortgage. Furthermore, you have the right to demand money from the property you co-own, which is why the bank made you co-sign on the mortgage. Making things even worse, if you quitclaim the property, you may have no right to file a partition action whereby you can force your co-owner/co-borrower to remove you from the mortgage.
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Breaking Up Is Complicated
Youre parting ways with a spouse or co-mortgage borrower. Youve agreed who will keep the house and take over the mortgage payments. But theres a problem.
In the eyes of your mortgage lender, the ties that bind arent legally severed until you remove your ex from the mortgage.
To solve this problem youll need to remove a name from your joint mortgage loan. There are a few ways to do this. The best way is usually to refinance, which may be less of a hassle than you think.
Heres what you should know.
In this article
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Why Get Out Of A Mortgage
Getting out of your mortgage has these advantages:
- You avoid a difficult financial situation
- You can use Mashvisorâs Property Finder to find another property
- If you got divorced, you can remove your name from the investment property mortgage, if needed
However, defaulting on the mortgage can damage your credit profile. And you may have difficulty getting another mortgage on another investment property. If the property enters foreclosure, it will remain on your credit report for at least seven years.
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Difficulty Getting A New Mortgage
A voluntary foreclosure can impact your ability to qualify for a new mortgage for years to come. If you didnt pay your first loan back, there is plenty of reason for a new lenders risk department to be skeptical of your ability to pay back a new one.
After foreclosure, Fannie Mae generally requires a waiting period of seven years before youre eligible for another conventional mortgage. There are exceptions in special circumstances, however. The waiting period can be shortened to three years if youre able to document extenuating circumstances that are not likely to recur, like a sudden job loss or large medical expenses.
During that waiting period, you should take steps to improve your chances of getting approved for a new mortgage, including making on-time payments with all your other bills, securing a job with a steady paycheck and saving as much money as possible to help afford a large down payment.
Option : Refinance Your Mortgage After Building Equity
Lenders usually dont allow you to refinance a mortgage that is underwater you need to have some home equity. Instead of walking away from the mortgage, your best bet is to make payments on the loan until youre in positive territory before refinancing.
There are also two federal programs that help distressed homeowners refinance more easily: Fannie Maes High LTV Refinance Option and Freddie Macs Enhanced Relief Refinance. These are similar to the now-expired Home Affordable Refinance Program . You can contact Fannie Mae at 800-232-6643 or Freddie Mac at 800-373-3343 to see if you are or could become eligible.
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How To Remove A Name From A Mortgage Without Refinancing
- Mortgages & Financing
- How to Remove a Name from a Mortgage Without Refinancing
Removing a name from a mortgage is possible under a few different circumstances. The main ways to remove a name from a mortgage without having to refinance include:
- A loan assumption
- Pay off your home
Obviously, some of these options are more realistic than others, but well work to explain the various options available. Knowing how a mortgage works can play a role in helping you understand your options. Also, it helps to know that if you wish to remove a name from the mortgage, you must receive permission from your lender, no matter the reason.
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Can I Use Projected Rental Income Qualify Mortgage
Can I Use the Future/Expected Rental Income to Qualify for the Mortgage on the Property? Yes, you can use the expected rental income to offset the monthly mortgage payment of the property you are buying. In fact, you can use that expected income for an investment property or one you plan on living in.
Potential Irs Tax Bill
Tax liability is another potential danger of strategic default on a mortgage. After the bank forecloses and sells the house, it might forgive the remaining mortgage amount so you dont have to pay it back. Still, youre not entirely off the hook.
This may trigger a 1099 form for the forgiven amount, though the income will be much lower than the balance of the loan, OBrien says. Consult a tax advisor before doing this.
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How To Get Out Of A Mortgage Contract Legally
You spend a lot of time and effort searching for the perfect home, and youâre elated when it goes under contract. If you decide to back out, you probably have a good reason for doing so. It might not be easy, but there are ways to back out of a mortgage contract legally. Hereâs how.
When you purchase a home, youâll have numerous closing documents awaiting your signature. One of these documents is your mortgage contract, which is issued by your lender and contains the terms of your home loan. By signing the contract, youâre agreeing to pay the mortgage according to the loanâs terms.
To be clear, a mortgage isnât the money used to purchase the home, but rather an interest in the home itself. In a mortgage, the homeowner will give up their right to the property if they default on their payments.
Youâve made it as far as closing on the home, but at the last minute, you want to back out. The good news is that federal law allows the buyer to cancel the mortgage contract via a three business day right of rescission period.
Hereâs how you can take advantage of it:
You Cant Make Your Mortgage Payments
Its not uncommon to be temporarily unable to make ends meet, especially in challenging and uncertain economic times. In addition, other unforeseen events such as unexpected job loss, mounting medical bills, and growing credit card debt can also make it hard to keep up with monthly mortgage payments.
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Speak With Your Lender About A Forbearance Program Or Loan Modification
If you know that in the near future you wont be able to make your mortgage payments, you can ask your lender for an application for a loan modification. Just like in a short-sale, you will need to draft a letter of hardship in which you explain in detail why you cannot continue to make your monthly payments. In this letter, you need to explain how you got into your hardship, how you have tried to improve your situation, and why theres no way to escape your current hardship.
If the bank accepts your application, they may suspend your payments temporarily, reduce your payments, or modify your interest rates.
While its almost guaranteed that in the long run, youll end up paying more in interest, a forbearance program will give you the opportunity to avoid foreclosure.
