How To Get Your Name Off A Mortgage After Divorce In A Community Property State
If you live in a so-called "community property state," this means that after divorce, you and your ex-spouse must divide up all of the debts and assets acquired during the marriage. For many couples, this means selling the home and splitting the money acquired through the sale. But if one of you wants to keep the home, things get a little more complicated. If you're not the one keeping the home, your priority should be to get your name taken off the loan so that you are not responsible for the money owed on that loan. There are a few ways to go about this.
A Loan Assumption
This is the simplest way to remove your name from the loan, but it will only work under certain circumstances. Essentially, a loan assumption means your name is taken off the mortgage, and your ex becomes 100% responsible for paying off the rest of the mortgage. The terms of the loan -- including the payoff date and interest rate -- remain the same.
The caveat is that in order to qualify for a loan assumption, your ex alone must have an income and credit score that the lender deems sufficient to keep paying on the loan. If your ex has poor credit or his or her solo income is not sufficient to cover the payments, the bank may deny your loan assumption request.
If your loan assumption request is denied, another option is to have the home refinanced in your ex's name. This option does require that closing costs be paid, but it may be your only choice if your ex has a bad credit score or lower income. The bank will consider your ex's financial state and hopefully offer a new mortgage with different terms.
For instance, if the bank feels your ex is unable to make the payments on the remaining 10 years of your current mortgage, they may spread the remainder out over a new, 30-year mortgage with much lower payments. This may not be the best option for your ex in the long-term since they'll pay more interest and closing costs. However, it will get your name off the loan -- which is what you need to be worried about.
To start the process of getting your name off your mortgage, contact your lender or refinance company, like Liberty Escrow Inc. They'll give you the paperwork to begin filing for loan assumption, and if that is denied, they can then guide you through the refinancing process.