The choices and activities that are involved in a divorce are made more difficult by the fact that one of the parties owns a home. As a result of the fact that California is a community property state, you and your exe must equally divide all of the marital obligations and assets. If you and your spouse have a joint mortgage on a property that has equity in it, the spouse who stays in the house may also be liable for continuing to make payments on the mortgage. In most cases, the surviving spouse will purchase the leaving spouse’s share of the property and then remove himself from the title deed. You may remove your name from a home loan after a divorce thanks to a federal legislation passed in 1982. This law allows you to do so without having to refinance the loan or sell the property. The procedure, which is known as loan assumption, is less expensive than the alternatives, and it could also be faster.
Notify your mortgage lender that your ex-spouse will be taking over the payment of the mortgage note since you are divorcing. Inform the financial institution that you would want to take part in a loan assumption, in which your former partner would assume full responsibility for the debt and you would be removed from the promissory note. You are able to maintain the same terms of the loan by assuming your ex-existing spouse’s loan, including the interest rate, loan features, amount, and number of remaining years on the loan term.
Inquire with the lending institution about the possibility of obtaining a release from responsibility. The release relieves you of all responsibility to repay the debt in the event that your former partner does not. If you get a release of responsibility, your credit is shielded from things like missing payments, default, and foreclosure, as well as any later liabilities that may arise. In the event of a loan assumption, the responsibility of the departing spouse is not always released by the lender. If, on the other hand, the lender decides to release the cosigner, they would almost certainly check your ex’s credit score as well as her capacity to repay the loan on her own. It also must guarantee your mortgage payments are current. The discharge of responsibility might need the consent of a third-party investor as well as the lender’s signature.
Your name may be removed from the title of the property by using a quitclaim document or an interspousal gift deed. Because of this, your ex will now be the sole owner of the house, and you will no longer have any ownership stake in the property. But it has no influence on the burden of paying back the mortgage.
Things You Will Need
According to the National Real Estate Investor, the usual cost of taking over another person’s debt is one percent of the total loan amount. A release of responsibility from a lender will normally cost between $300 and $1,000 in addition to the $250 to $500 in administrative costs that will also be charged.
You should remind the lender of your rights under the federal Garn-St. Germain Act if the lender attempts to persuade you that you are required to pay off the whole loan amount by refinancing or selling the property because of a stipulation in the original loan agreement. The statute forbids lenders from calling your debt due in certain situations, including the passing of a spouse, the dissolution of a marriage, and a few others.
If your lender is unable to absolve you of responsibility for the loan, you may get yourself totally removed from the obligation by informing the lender that you want to refinance the loan with another financial institution.
If you have a loan that is underwater, it means that you owe more on the house than it is now worth. In situations like these, loan assumption is often not a possibility; but, a modification, short refinancing, or short sale might be viable alternatives. Contact your lender for qualifying criteria.