Unmarried? Treat home purchase like business deal

Q: How do you get your name off a mortgage that you had once shared with an old flame but now have no communication with? The goal is no money needed in return, and not to have to pay a sizable fee or cause havoc with the old flame.

A: Lenders are reluctant to release one borrower from a mortgage on which two borrowers originally signed for the simple reason that they are in a much stronger financial position with two people on the hook rather than one.

You didn’t say whether you or your old flame currently own the property, so I will address this issue from both perspectives.

If you no longer live in the home and want to have your name taken off mortgage, you have virtually no chance to accomplish that. If you contact the lender and asked to be removed from the loan, they would probably refuse. However, they might agree to release you from the mortgage if your old flame is willing to assume 100 percent of the liability for the mortgage, and he or she can qualify for the loan payments based on his or her income and credit only. Since you said you do not want to “cause havoc with the old flame,” I assume you are not on good terms with him or her, and therefore such an agreement may be difficult, if not impossible, to reach.

Now, on the other hand, if you are the one living in the house and you are trying to get your old flame’s name off the mortgage on which you are making the payments each month, the simplest option is to refinance the mortgage and get a new loan in your name only. That assumes that you have sufficient income and credit to qualify for a new mortgage. If your old flame is on the title to the property with you, you would have to get him or her to sign a quitclaim deed to you, releasing all their ownership interest in the house. Since you said you are not looking for any money, I assume there is currently no equity in the home and therefore no need for one person to buy the other person out.

You mentioned in your letter that you don’t want to pay a “sizable fee,” but that may be unavoidable unless you get a “no closing costs” refinance, which means taking a higher interest rate than you could get if you choose to pay the closing costs. However, you will not have to pay the closings costs out of pocket because they are typically added on to your loan amount.

The moral of this story is that it is always risky for an unmarried couple to become co-borrowers on a mortgage to purchase a home. While a fairly large percentage of marriages end in divorce, far more unmarried couples end up going their separate ways at some point in time — usually sooner rather than later.

You entered into a real estate partnership when you bought the house together. The smart thing to do would have been to treat this as a business transaction rather than simply a lifestyle choice and draw up a contract that outlined exactly what would happen if and when you broke up and one of you wanted to keep the house. For example, you could have required both parties to cooperate fully in completing whatever paperwork might be required to release the non-resident party from the mortgage. You could also have agreed to split whatever fees might be incurred in this process 50-50, or in any way that you chose.

Unfortunately, most couples don’t buy a home together thinking of it as a business transaction, so these kinds of potential problems are typically not worked out in advance before tempers flare.

Steve Tytler is a licensed real estate broker and owner of Best Mortgage. You can email him at business@heraldnet.com.

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