Joint ownership of marriages is common and mortgage loans appear in both names. However, you may find yourself in a situation where you want to refinance your mortgage regardless of your spouse. Perhaps you have a second home, or your spouse may not have very good loans that would prevent you from getting a better interest rate through refinancing. Can I refinance my mortgage without my spouse?
Some couples decide to refinance a joint mortgage on one name after divorce. This exempts the mortgage from the person who removes his name from the loan.
However, unless they are also removed from the title, they will still benefit from the sale and equity of the home, so it is important not only to refinance, but also to update the title to reflect one owner. The act of filing a claim is commonly used to remove a spouse’s name in divorce.
For example, suppose your home is worth $ 300,000 and you owe $ 200,000 on your mortgage. You have $ 100,000 and you need $ 50,000 to buy out your spouse’s share if you agreed to a 50-50 split. To get money, you refinance a $ 250,000 loan only in your name and pay $ 50,000 to pay off your spouse.
Even a divorce court cannot change the terms of the loan
As for lenders, both people remain jointly and severally liable for the loan. In other words, the lender can come after either – or one of you – in the event of default. (Both of your credibility ratings will hit if your payment is late.)
Related: Dealing with a divorce: how to deal with a mortgage during a split
The only legal way to take over a loan is to cross out the former spouse’s name from the mortgage.
Your credit results
Lenders want to be sure that they are lending money to people who can repay the amounts borrowed. When you apply for a mortgage with your spouse, lenders look at the lowest credit score between you; being married does not mean that they will judge on average.
If your spouse’s credit rating is low, this can cause several problems. First of all, it may prevent you from getting a loan at all. Most lenders look for at least 580 points, so a credit rating below this may prevent you from qualifying.
Secondly, your spouse’s low credit score may prevent you from getting the best interest rate. The higher the credit rating, the greater the likelihood of a better interest rate. If your spouse’s creditworthiness is much lower than yours, you may consider leaving your spouse out of the loan to make sure you get the best possible loan terms.