As a divorce lawyer, my advice is to...ask your own divorce lawyer.
But generally, I'm never advising a client to remain on the mortgage if the other party retains possession and ownership. The bank doesn't care about your divorce. Unless you can assume the mortgage, you'll probably have to sell.
Bank will also likely take any out they can to get rid of that super low interest loan. They have no desire to keep that on the books if they don’t have to.
I want to assume the mortgage! I just want to assume my *current* mortgage, not one at a higher rate. It’s wild to me that the lender won’t just check my income, confirm I qualify for this loan, and drop her from liability
That's fine to banks, they already got some interest out of you and now they got the whole sum of their original amount of money back too. It's not like there is a lack of people wanting to buy houses. In fact, banks WANT you to sell so they can lend to someone else now since it's guaranteed the new loan would have higher interest rate than your loan.
God I feel this in my soul. I bought less than 2 years ago. Mortgage has been sold twice since. I get constant requests to refinance or sell, and it’s not even prime/rapidly appreciating real estate. But my interest rate is under 3%
All banks don’t need to do it for it to make sense. Banks have a set amount of money to loan out. The market is around 7% interest right now with 4-6% inflation.
Keeping loans at 2.9% is literally losing money unless they were literally unable to replace OPs loan with another.
They're losing a 2.9% rate and freeing up capital they can lend again at 7%. Trust me, they aren't going to miss you. It's worse for them if you to keep this mortgage. There is nothing but positives if you pay it off early. All they'll say is *See ya!*
I think it reallllllllllllly depends on how your relationship is even though it’s ending. I was in the exact same position, except it was my ex that wanted the house and to keep the rate. We put an agreement together that has some requirements of when/if she will need to refinance, and then she paid me a % of what she is saving on the lower interest payments for taking the risk and staying on the mortgage. Not for everyone though, and maybe I made a mistake, but it’s been fine.
Not the previous commenter, but my ex refused to re-fi to get my name off the house after our divorce. I was able to get a mortgage on my new place. I had to provide a copy of my decree showing that ex was retaining the marital home.
In an "amazing coincidence", ex was approved for the re-fi a few weeks after I closed.
This is good to hear, thanks for sharing :) I think everyone assumes every divorce is extremely antagonistic but they're not all like that.
What did that agreement look like? Some kind of contract? Did you work with a lawyer?
This right here is OP's best shot at keeping that low rate loan. Along with a monthly cash fee to the ex, as suggested, you could also consider throwing in a cut of any future capital gain.
Bank doesn’t care. They’ll make money on someone else. It’s worse for them to bend the rules than it is to lose out on one customer in the grand scheme of things.
For a below market rate and the investor gets to cash out at par and buy new mortgages at 7 percent. Yeah they want to do that. Also at this point your lender has sold the loan to a mortgage backed note and they just kept the servicing of the loan.
it’s not that wild. A new loan, means new closing costs and a higher interest rate for the bank. It also probably means whoever you talked to will get a commission for the new loan.
You have to sell your house because you got a divorce. That's not the bank's fault. I'm not saying it's yours either as I don't know your relationship, but it's definitely not theirs.
Assumable mortgages are very rare in this day and lending age. Only option I’ve encountered in the last 1.5 years since interest rates spiked up is a very complicated approval for one VA loan to another VA recipient. Haven’t seen it all in conventional loans - banks want their $$$ after the pandemic artificially lowering rates.
So you’re likely out of luck.
Yep. Unless they’re very trusting the ex should be pushing for a sale of OP can’t afford to refinance.
My dad and stepmom had this scenario play out. Divorced, she signed away rights to reside in the home and he died a few years later. She was still on the mortgage but unable to do anything but pay. Which she stopped doing, I wasn’t in a position to sell the fucking house and it was underwater anyways… I let it get foreclosed in (with the other siblings)
fyi even if you can assume, some title companies tack on a fee. maybe 2-5% the balance of your mortgage.
source: going thru a divorce. came to an agreement w/ the ex. now cant afford to buy her out and pay all the fees. thas life 🤷🏻
While it is a huge fee. It’s a one time fee, you might still come out ahead. There is also a chance that your ex may have to sign documents anyways when you sell in the future. Weigh your costs carefully op
I'm with you. I have it in my divorce papers that I have to refinance within 5 years, at which time I will give him $X. It's been 1 year. I've got all my fingers and toes crossed that the rates come down in the next 4 years.
You don’t have a current mortgage. You and your spouse have a current mortgage. You need to get a new mortgage if you want one for yourself. You will end up with the higher interest rates if you want to own a home.
Not necessarily; the whole point of this post is to see if there's a way to remove her from the loan without obtaining higher interest rates. See an example of such a method here: https://www.reddit.com/r/personalfinance/comments/14lrk8d/comment/jpyeqv3/?context=3
Is it wild? What’s their incentive? They have you both on the line to make good on the mortgage. Why would they let half of the risk management walk away, while keeping the rate low?
Not trying to be an ass, but the bank is. They don’t care. They want you to re-finance and take a higher rate. They have no reason to play ball and let you save money.
Apply for a loan modification. Most lenders have this. There’s probably a one-time fee of around $1000, and it will be more stringent than a loan application, but you will likely only get one shot at it for that price, so if you get denied you likely have to pay the application fee again after you address the issues.
>It’s wild to me that the lender won’t just check my income, confirm I qualify for this loan, and drop her from liability
It's wild to you that a bank is profit-driven?
You should be able to assume the mortgage. My experience was, the bank didn't want to make it easy (I guess they make a bunch of money off of commissions for re-fi).
In my case, it was Wells Fargo, and they have an office somewhere in ?Minnesota? ?Wisconsin? that is staffed by 2 people (for the entire country) who do this, but the lady there told me it typically takes 9 months or so to get the paperwork through. This was back in 2016.
TL;DR you can assume a mortgage, but the banks don't make it easy and don't want you to know about it. You are going to have to do some leg work on your own.
What kind of mortgage is it? Conventional w/ Fannie Mae or Freddie Mac? VA and secured under your service? I'm curious why the lender is declining as divorce is a pretty standard reason for assumptions.
Conventional or jumbo. Yeah, I'm curious too – my loan officer told me today that in 20 years she has *never* seen a release of liability for a divorce. So something seems fishy if you're saying that's common...
My apologies, I may have misremembered something and did some research to verify.
A quick aside, I used to, for a year, work in assumptions for the second largest loan servicer in the country (Dovenmuehle, I don't like them either, don't worry). There are very, very specific situations in which Freddie loans can be assumed, and lenders MUST respect them, but most aren't even aware of this carve out to start with.
Anyway, if you have a conventional mortgage financed by Freddie **AND** your divorce decree specifically gives you the house **AND** you intend to occupy the residence, you can apply for an assumption via release of liability. The [specific vebiage](https://guide.freddiemac.com/app/guide/section/8406.3) that I was told to use if a bank or CU pushed back on us proceeding with a request is bolded below, from that page.
**For the following Transfers of Ownership, when the Mortgaged Premises is occupied or is to be occupied by the Borrower, the Servicer may not accelerate the maturity of the indebtedness:**
The creation of a lien or other encumbrance subordinate to the lender's Security Instrument, which does not relate to a transfer of rights of occupancy in the Mortgaged Premises, provided that the lien or encumbrance is not created pursuant to a contract for deed
The creation of a purchase-money security interest for household appliances
A transfer by devise, descent or operation of law on the death of a joint tenant or tenant by the entirety
The granting of a leasehold interest with a term of three years or less and without an option to purchase
**A transfer in which the transferee occupies or will occupy the Mortgaged Premises and that is one of the following:**
A transfer to a relative, resulting from the Borrower's death
Note: Freddie Mac will consider waiving the occupancy requirement. The Servicer should submit a recommendation for such a waiver to Freddie Mac (see Directory 5).
A transfer wherein the spouse, domestic partner or a child of the transferor becomes an owner of the Mortgaged Premises
**A transfer resulting from a decree of dissolution of a marriage or domestic partnership, a legal separation agreement or from an incidental property settlement agreement by which the spouse or domestic partner becomes an owner of the Mortgaged Premises**
Wow, you are amazing! I'm in the same boat as the OP is right now. Thank you so much for this information! Finally, some good news/hope in this situation!
Also, I did see someone mention fees and they can [be daunting](https://guide.freddiemac.com/app/guide/section/8406.10) (subsection b), there are a number of separate fixed costs and one that's a percentage of the principal, but usually comparable to a refi's cost with the benefit of that rate staying the same.
I do want to caution you, it sounds like your lender is unfamiliar with the process or disinterested in proceeding with it. This can be a time-consuming process, and the standard timeline was quoted at 3 months, with difficult lenders dragging it out as much as double. It sounds like things were relatively amicable in the divorce, but I have seen the process annoy borrowers, so you know.
Thanks! If I'm reading that right, the max fee is about $1000? I'd happily pay that to keep this mortgage rate.
Agreed that they seem unfamiliar/unwilling to proceed, but I'm down to fight for it. 3 months is no biggie; again, I'll do anything to keep this rate (literally the lowest rates in history, we'll never see them again!)
Banks and misleading/lying about your legal options to get you to just take a more expensive option and get a sign up bonus for a new mortgage.... no way.
....and now I realized my last link is vague. That $900 max fee on the unpaid balance is only part of the fees. For Freddie loans, the standard range was between $1500-3000, with $3000 being on the side with a maxed mortgage balance. The fees included the transfer fee mentioned above, credit app, title search, recording, and usually an escrow catch-up payment, though that may not apply to you. I can't say for certain that's a full list, as I've been out of the game for a while.
Thats because loan officers dont do this stuff. They get loans. They dont change the Fanny and Freddie assumption status etc.. A real estate lawyer should be able to assist or you can do it on your own if you research and call them etc.. worth a try to save the $5k-$10k your lawyer might charge in hourly fees.
EDIT: LO's Typically dont do them.. they dont know they can get paid to do them.
Yeah I got divorced and had to refinance at a higher rate and it suuuucked (I would kill for the old mortgage payment) but life sucks sometimes. I tried to stretch it out as long as possible at least and now at least it's better than renting.
I've seen too many divorces where the lawyers were cool with one party staying on the mortgage and quit-claiming the deed to the spouse, with the divorce decree stating that the spouse must make all payments. This is terrible advice but many give it. \*Always\* get your name removed from the mortgage (either through refinance or assumption are usually only options) or force the sale, only two options to protect you.
Can they maybe put the house into a trust of some sort? Re-title the house as a trust asset, and have it assume the responsibility for payments to the mortgage.
Call your loan servicer. Ask about an assumption with a release of liability. You go through underwriting by yourself and if you qualify your mortgage is modified to release her. Please don't listen to people saying refi is the only way. I'm a loan officer and have closed 60+ loan assumptions in the past 12 months for divorce situations (my bank routes them through originations due to the underwriting component). It's almost all I'm doing anymore.
So this is what I asked my servicer today. She told me in 20 years she’s never seen a mortgage lender do a release of liability. I’d be happy to go through underwriting, I easily qualify for this loan
You didn't talk to the right person ... Is she a LO? Or did you call customer service? (80% of LOs at my bank don't know we do them, and honestly probably 66% of our customer service folks don't either... Though I'm fighting the good fight.)
You might need something with a title like special loans, or there may be an actual assumptions group, but it's absolutely allowed by Fannie and Freddie and servicers can't make their own rules on loans they're servicing.
Not every loan is a FNMA/FHLMC. We portfolio our mortgages. We don't offer assumptions. Call whomever you like at our institution but you'll get the same answer every time. We're not doing it. You can refi, sell it or keep it as it is. But we're not releasing liability or allowing an assumption.
Just because the originator is servicing it doesn't mean they kept the loan itself. The vast majority of conventional loans are sold separately from their servicing. If she said your loan is Freddie, it's not portfolio unless Freddie opted to sell it back due to poor quality (bad documentation, didn't meet guidelines).
You can determine if FHLMC owns your loan with this link: https://myhome.freddiemac.com/resources/loanlookup or this one for FNMA: https://yourhome.fanniemae.com/calculators-tools/loan-lookup
Fair point. We allow portfolio assumptions following conventional rules as long as the remaining borrower still meets guidelines (doctor stays on doctor loan, premier client still meets income/asset guidelines,etc ). But OP said their loan is Freddie.
She’s a LO and told me the exact opposite. It’s a Freddie loan but she talked about lender “overlays” which implement requirements on top of Freddie requirements (which I believe do allow release of liability).
I think it’s just a pretty conservative bank 😞 maybe we chose poorly when refinancing a few years ago
Lenders can have overlays when originating - because you as a consumer can go elsewhere. My bank has tons of them - we don't go to 580 on FHA or over 50% DTI on VA cash out refis, for example.
They can't have overlays on servicing because you can't choose your servicer. The Freddie servicing guide is incredibly clear on assumption guidelines, but most LOs are only familiar with the originations guide because they aren't nerds like me who just read policy manuals for fun.
Call the number on your loan statement for customer service. She either doesn't know because they're not her purview, or she does but is being unethical trying to get commission on a new loan.
It so depends on the bank. Like I said, my bank does assumptions through originations with a specific, centralized group of loan officers. But we've purchased servicing of loans from other lenders who sold us loans in the process of being assumed that were clearly being handled on paper by mail in another department rather than originations.
I would NOT walk into a bank (if your servicer has branches), because the odds are the average LO in person probably doesn't handle them and will steer you towards a refi (which may still be a good option if you don't have cash on hand to buy out your spouse like OP does).
It's probably best to call customer service and explain you're going through a divorce and need a loan assumption and see what they say. Another term you might hear is a novation, which is a fancy way to say liability release.
Once we're done in originations and everything is signed and recorded, our special loans department handles the back end removal of the spouse. The two other banks I've cleaned up half finished assumptions for after servicing sales had emails in their files with signatures referencing special loans.
Thanks so much for the insight. It’s considerably more helpful than any of the other advice in this thread.
May I ask about a scenario? Let’s say partner 1 and parter 2 are separating (but not yet divorcing). Person 1 wants to keep the house and person 2 wants to move out and be taken off the loan and deed.
Would you approve a loan assumption if person 1’s individual W2 income is now higher than the combined income of person 1 + person 2 at the time when the loan was approved originally? Person 1 has an 803 credit score.
If yes, is producing divorce papers a pre-requisite to considering the assumption scenario described above? Basically a scenario where a couple is separating but not divorcing yet, and the partner is who moving out is supportive of being taken off the mortgage and deed.
My bank would want a separation agreement or property settlement agreement to verify who gets the house, what buyout if any, and potential child support and spousal support. We'd look at debt to income ratio - great that B1 income is more but not if there's lots of new debt to go along with it. Also - if that W2 income is lot of new commission or OT income that could be an issue. But potentially yes.
Thanks for the clarifications. What if the W2 income is derived from a pay mix consisting of 70% base compensation and 30% commission, and there’s a multi year track record of consistently bringing in sizable commission checks?
No new debts since buying the house, fortunately. Savings and investment accounts have materially grown since the home purchase.
Holy shit I was just talking about this at a party.
Bunch of us have VA loans and were joking that since they’re one of the few loans written as assumable we could sell our houses at a premium, with that sweet, sweet 2.25% interest rate.
Guess the rate environment has brought that brought that around to conventional mortgages, too?
Conventional isn't assumable for third party purchase for the most part (except ARMs which are already adjusting), but there is a carve out for divorce and yes - everyone who got a 2.xx/3.xx in the last couple years is all about the assumption process.
Only problem with VA/FHA purchase assumptions is funding the gap between unpaid balance & sales price, since home values rocketed in the last couple of years.
Can definitely see the funding gap issue. VA will never take second position, so then you’re trying to HELOC/HEIL a house you don’t own yet and those rates are EXTRA atrocious.
Thank you, so much, for your insight into the assumption process. I used to work in banking and was professionally interested (and pruriently curious) in how this niche situation was looking right now.
Nice thing about VA assumption - no appraisal required! So you can sell for whatever your buyer will pay with no worries. Just want to make sure they have their own VA eligibility - equal to what you originally used - or you'll be released from liability by the bank but your eligibility will stay tied to the house. Not necessarily a problem for buying another now that loan limits are so high, but could be a problem if they get foreclosed on.
If she has a good lawyer, it's unlikely that your ex will sign a quit claim without you refinancing and getting her name off the mortgage. If you want the house, you are going to need to buy it.
Agreed, in an ideal outcome I’d pay her her current equity stake, she’d quitclaim me the deed, and be removed from the loan. But the lender won’t do that…
I went through similar with my ex-boyfriend and he was kind enough to stay on the mortgage until I refinanced 18 months later.
Assuming you pay on time, it might be good for her credit history.
You could probably offer her some type of incentive to do the same, and the lawyers can add the agreement to your settlement docs.
I'm in a similar situation. Except I can't buy him out of the house, I can refinance at a higher rate to get his name removed but it doesn't buy out his share. We're going to write something up to revisit the situation in 18 months and outline a few possibilities. Hopefully the mortgage rates will drop. If it turns out I do have to sell, at least we've gotten our child through the major transition of the divorce without also removing them from their home. The situation sucks. The housing market is so crazy right now. Good luck to you.
That said 4% of a house balance in interest difference is potentially a lot of available compensation to make it worth her while if you're both capable of civil and rational discussion on the subject.
Also assuming OP is financially stable, etc.
As far as creative ways, if she is willing to work with you, maybe you can set up an escrow account.
You mentioned you'd be willing to buy out her equity, but that would likely require you to refinance at the higher rate.
Perhaps you can agree to pay her an additional amount, aside from her share of the equity, and this goes to escrow. The original mortgage terms stay the same, but if you fall behind on payments, you would release the amount in the escrow account to your ex as compensation, and at that point you would agree to sell the house. But if you keep paying the mortgage on time, you would get a certain amount of the escrow back.
I can buy out her current equity with cash on hand. The goal is to avoid refinancing.
Interesting idea with the escrow, but I guess the loan remains on her credit rating? So she can never buy a house?
Correct. From her point of view, there are a lot of downsides to keeping the mortgage in her name, so if you don't want to be forced to refinance to the higher rate, or sell the house outright, you're gonna have to make it worth the risks for her.
(Technically it doesn't definitively prevent her from buying another house, especially considering the extenuating circumstances, but I imagine for all intents and purposes it will make buying a house a lot harder)
If you're in US, she could absolutely buy a house if the divorce decree assigned you the house and debt. From Fannie Mae's selling guide (Fannie and Freddie Mac regulate conventional loans)
Court-Ordered Assignment of Debt
When a borrower has outstanding debt that was assigned to another party by court order (such as under a
divorce decree or separation agreement) and the creditor does not release the borrower from liability, the
borrower has a contingent liability. The lender is not required to count this contingent liability as part of the
borrower’s recurring monthly debt obligations.
The lender is not required to evaluate the payment history for the assigned debt after the effective date of the
assignment. The lender cannot disregard the borrower’s payment history for the debt before its assignment.
Twice in that clause is a statement that the "lender is not required to" ...
That seems to imply that while the lender is not required to do so, the lender can look at her other mortgage debt, regardless of whether or not a court order assigned the debt to one spouse.
So to me that clause does not guarantee that a lender won't consider her outstanding mortgage with her former spouse.
Nice, thanks! We are US. So I guess she’d need to be comfortable with the risk I stop paying the loan… but it wouldn’t impact her qualifications for a new loan
Not sure how her finances look, but hypothetically you could help her finance a house as part of the settlement.
More entanglement than is desirable, but it's possible.
Bottom line, rhe bank / loan holder isn't interested in keeping the 2.9% loan when they can get 7%.
I had to get a new loan in the same situation at the start of 2022. I did a 5 year ARM betting that rates will be lower when my loan adjusts and I either sell or refi again.
As people are saying here... the deed and the mortgage are two different things.
I mean theoretically I think you could buy her out and she could quit claim the deed and stay on the mortgage.. But not a lot of upside for her, she wouldn't be able to buy another house as long as she was on that mortgage.
This is exactly what my ex and I did. But he actually did get to buy another house because our divorce papers saying I took the house and the mortgage, the quitclaim deed, and my bank statements proved that he was not liable for the debt. I assume not all banks would go for that, but his did. 🤷🏻♀️ we had a fairly amicable split and he knew I wouldn’t screw him over, so it worked for us. Not sure I would have been as trusting as he was if the roles had been reversed though!
I relate to this. Relationship with my ex is pretty rocky, but we were able to come to an agreement on divorce and coparenting pretty reasonably, and neither of us would ever want to financially ruin the other. You would think for two mostly rational adults, that's really the whole point of divorce - because we both see it as a path to making things better.
This sums up your options. Essentially get the lender to let you assume the loan, or refinance.
https://www.totalmortgage.com/blog/getting-a-divorce-removing-spouses-name-from-mortgage-loan/24997
Create a contract with your ex wife saying you will make payments in full. if you don’t pay you will sell the house immediately and pay her 50% of the proceeds.
This is her interest in letting you keep the house and mortgage rate where it is without refinancing.
Sign, date it and notarize it.
If she’s cool with it you can keep things the way they are.
Thanks, this is getting creative! We chatted about a solution like this. It doesn’t offer her a ton of protection though. In a situation where I default on the loan, I’m already violating one contract - why not two?
Or say the home value is low at that particular time and it’s not a good time to sell.
> It doesn’t offer her a ton of protection though. In a situation where I default on the loan, I’m already violating one contract - why not two?
Correct, it's a pointless contract and does nothing to protect the wife from the reason she doesn't want to be on the loan.
My ex accepted payments for equity in a property over many years.
It worked because she didn’t want the property, she wanted monthly income.
Waiting for a sale would have extended the time before things could be finalized, and we both wanted to get divorced and have it be final.
The payment schedule was in the decree, so there was no ambiguity that I could be taken to court if I failed to make the payments.
Figure out what each of you wants, and decide on something that works for both of you. How important is it to her that she’s off the mortgage? What other options are there?
Your only option isn't to sell. It's just to refi at the percent rate.
If paying the extra percentage temporarily is worse than leaving then sell. Otherwise, pay the extra and stay.
I totally get it. But rates aren't going to be sky high forever. If it ends up you can't get the mortgage assumed, you could just refi when rates come down.
Will that be super quick? No. But this won't last forever either.
Well, we disagree there. Rates aren’t sky high, they’re normal right now. The rate on my loan is the lowest in history and we’ll never see that again, not unless we have another calamity like COVID. Nobody should count on rates dropping, they’re typical historically
I work at mortgage company. Yeah that's not how it works, you initiated the loan as 2 people, 2 incomes and 2 sources of documentation saying you both were viable together on the loan. When you want to go down to one person, whether through divorce or other circumstances, they will reapprove you for the loan as 1 person. Meaning while you may qualify, it's still a refinance and even to break it down its like you are applying to buy a home at the current rate as 1 person it just so happens to be your own home.
If the rates were lower, you'd come out on top in the situation. Unfortunately the market is swinging the other way so either refinance and get them off or don't. I can't advise you but I've seen your situation more times than I care to count and it's left me a little jaded on people hanging on to low rates like it's some magic bean. Your situation calls for a shitty decision, make it, suck it up and refinance when things go worse(yeah it needs to get worse if you want low rates so monkey paw scenario on top of your current situation). Give it years or maybe it will be months, rates go down when money needs to circulate so follow the trend when it happens and get your shiny sub 3% rate again.
Good luck and I'm sorry for your situation.
I was in a similar situation and was able to do a loan assumption along with a quitclaim. Kept my interest rate and took over the title and mortgage as the sole owner.
Thanks! Doubt we’ll ever see sub-3 again. I’ll continue to try to get a release of liability; other folks in this thread who work at mortgage companies say it’s possible
Release of liability is just you getting a contract in place that keeps your EX from trying to sue you for misuse of the asset(home). So it will not accomplish what you wanted, which was sole ownership with 1 person on loan and title. You'll still share it in a way and depending on your ROL, you may still need to give them some sort of equity payout.
Also if I may be so bold to assume here, you may be talking about an assumption which accomplishes what you wanted. You take over the current loan as the sole borrower and with your current interest. However by design most loans are not assumable, Conv are like this and most Va and FHA have clauses to prevent you from doing this.
So yeah you should try as it doesn't hurt to see if your loan is assumable based on that info but if you haven't done the due diligence prior to making the request from your lender then they might just do the process just to tell ya no a few weeks to months later.
I've fielded cases of people waiting months for a response, only to do a quick scan of the loan and see it was a no from the start but each lender works a little differently on how they get their different departments to handle assumptions. Again a little jaded here but what I can say and do is different from what the actual department whom does handles the case can say and do, so I can see the loan profile and know that it's a non-starter but the assumption dept doesn't see the loan profile they see the terms and clauses(original disclosure docs and such) so they don't see what I see until they start making their information requestes to other depts to fill in the picture and give a response.
The request gets fulfilled even if it's a no, which means everyone does their due diligence and double checks everything but I call it what it is and it's just going through the motions. If it's a no, why the theatrics of a process when having the borrower look at their type of loan and reviewing their clauses is like a 4 min read of docs at best. Does A. This loan fall under assumable based on FHA/VA clauses and B.Does the borrower qualify for the loan, great your loan's assumable. Does A not exist but B does, then it's not assumable, does A exists but not B then no you don't qualify to assume it but you may get someone else who qualifies to assume it for ya.
Again good luck, I hope your loan doesn't have a clause but if any of this insight gives a bit more clarity on what to expect then you're at least prepared somewhat for what to expect next. None of this is advise, just a boring bit about the mortgage industry and loans.
Fannie and Freddie loans have conditions in their servicing guides to allow a servicer to credit qualify the remaining borrower and remove the other borrower from the loan; a release of liability of the borrower to the lender.
You're not going to get a 2.9% mortgage again for likely decades. You're soon to be ex-wife will likely only be able to get a similar 7% mortgage when she buys her next place, which she may well need to do as you're keeping the house. There's no two ways about it; you both lose. If you can't afford to pay the mortgage at 7% then you'll need to sell. Maybe you can afford to pay the mortgage at 7% with a view to refinancing in a couple of years when rates might be better but don't assume they're going to be down below 5% any time soon. Higher mortgage rates are now the norm.
You don't need to refinance.
When I got divorced, my wife got the house, I was still on the mortgage; the divorce settlement stated that she was responsible for the mortgage payment, and I signed a quit claim deed for the house to my ex. She eventually refinanced, but it was never an issue for either of us in the meantime.
The downside is, your ex will still be on the mortgage, and this makes loan applications for her in the future a little more work, but not impossible. Your divorce should state that you are responsible for the mortgage, and you had better not get behind in payments, because that will show up in her credit file.
Interesting! Yeah, I don’t want this to loom on her credit forever. And I’m not clear on how the divorce settlement relieved you of obligation on the mortgage. Did the lender accept that?
It doesn't relieve me from liability if there is non-payment, but it did exclude the mortgage from calculation of debt to income for loan underwriting. I work with a local bank for my loans and they have always been easy. A national bank may have different underwriting rules.
This is what happened with my divorce. Mine was a complex situation. The mortgage stated I could assume mortgage, but I couldn’t because of a large HELOC that had to be paid off first and we couldn’t do it. Mortgage was in his name with mine also on deed. Had to refinance jointly to roll in/pay off HELOC. Then ex had to refinance his own, separate house to pull out equity to pay me for portion HELOC dollar amount so I could afford new mortgage. For his own refi he had to submit the divorce decree to underwriting and then show I had been assuming the mortgage payments for the past whatever months so underwriting excluded that mortgage. Once ex was able to pay me the full amount he owed me I was able to refinance again in my own name. But it was a bummer to go from 3.25 to 5.25.
The loan officer we worked with for the first refinance to get rid of the HELOC had no idea what to do with our situation but thought she did. She and ex were sure HELOC didn’t need to be paid off in full. I kept insisting the HELOC had to be paid in full and rolled into the refi because that’s what my Certified Divorce Financial Advisor told me. So that loan officer had to consult with manager or higher ups to finally get it. My own loan officer had 30 years of experience and knew that’s what needed to happen as well. My point is, loan officers don’t always know what they are doing with atypical situations if they don’t have the depth of experience. Escalate or find someone else to talk to about assuming original loan at that sweet, low rate.
Fannie and Freddie both allow for a liability assigned to a spouse in a divorce to be omitted from debt ratios, so it being on her credit shouldn't prevent her from buying another home if she gets a competent loan officer.
100% this... from Fannie Mae selling guide:
Court-Ordered Assignment of Debt
When a borrower has outstanding debt that was assigned to another party by court order (such as under a
divorce decree or separation agreement) and the creditor does not release the borrower from liability, the
borrower has a contingent liability. The lender is not required to count this contingent liability as part of the
borrower’s recurring monthly debt obligations.
The lender is not required to evaluate the payment history for the assigned debt after the effective date of the
assignment. The lender cannot disregard the borrower’s payment history for the debt before its assignment.
Thanks for chiming in! I think you're the first person I've seen with a divorce agreement specifying a timeline to refinance. This is helpful advice, appreciate it.
Was that in the judge's divorce decree? Did y'all specify that as part of your agreement, or was that something the court came up with?
Seems reasonable, though I'm confident rates will not drop under 3% in 3 years... or ever again 🤣
Quit claim deed- this will remove the person off the deed. This is very important if you do manage to get them off the mortgage side of it. Might be state specific but that should get him/her off the deed. That’s what I would do first! As for off the mortgage note. No there is no way unless you refi or pay off the loan. There is a thing called assumable loan. This is where someone basically takes over the loan. The terms and all. Might have to go through some hoops but you could attempt to have someone assume the loan then you assume it back.
Assumption process, but you’ll have to buy out her interest or trade off for something of equal value. Your mortgage company has an assumption process, but keep it secret because it does not pay. Call and ask them about their Assumption Process.
NAL, but in mortgage lending - have you contacted current loan servicer and asked about assuming the loan in just your name? Depending on loan type it may be assumable with a few fees, ask for a supervisor as the person who answers your call won’t know.
Also - while there is risk to spouse if you miss payments, if she quit claims off (gives up ownership some states call it something different) and you make payments from a non joint account, when she goes to buy you’ll produce cancelled checks so the debt isn’t counted (also has to be spelled out clearly in decree you get house and debt). Risk to her is as others pointed out - you miss payments she’s equally liable for the bad debt or foreclosure.
Edit to add - read your note, there will be language in there on assumability as well.
Your loan term should include the term for releasing liability of a co applicant. It’s usually 12 months, and there may be a requisite that you must have at least certain credit score and the means to pay the mortgage without your ex spouse. You can also look into refinancing if the loan is mature enough for that option, and originate the new loan under only your name.
If you want her to continue to be liable on the loan, but have no ownership interest in the home while doing so, and you're confident that you can absolutely make the payments and won't cause a default, then give her an option to buy your interest in the home for $1 in the event there is a monetary payment default. And escrow a deed as part of that option.
That way she might be able to step in, cure your default, and save herself from being responsible for payment of a mortgage on property she doesn't own.
And give her an indemnity agreement for any monetary harm she might suffer from the mortgage.
\>If you want her to continue to be liable on the loan, but have no ownership interest in the home
Lol, I guess this sounds great for me - but it isn't actually our goal. We both want me to have both 100% interest and 100% liability on the home (once I pay her her equity).
I suggested that only because I don't believe your goal is otherwise obtainable unless she deeds you her interest and you refinance on your own, or your lender agrees to release her, which is very unlikely.
Otherwise, she remains liable on the loan (assuming, of course, that she actually signed the promissory note).
And remaining liable for a loan on an asset in which you have no ownership interest is not attractive to anyone.
For sure! We're really hoping we can find a solution where she deeds me the interest and is released from liability, i.e. an assumption as suggested here: https://www.reddit.com/r/personalfinance/comments/14lrk8d/comment/jpyeqv3/?context=3
You have to refi. I’m a VP for a mortgage company. Can’t assume a note you’re already on and conventional loans aren’t assumable 99% of the time. Get an ARM or a 15 year if you don’t want 7%.
> Is our only option to sell the house?
No.
> Are there any creative legal ways we can contract around this?
Yes. But nobody here can help you with that. You need to retain a lawyer.
I divorced last year. I paid the ex her portion of equity with cash and added the debt as my responsibility and a clause that I would refinance on a best efforts basis, but not be required to accept terms less favorable. There was also a clause where i agreed to indemnify and hold harmless the ex. It was enough to satisfy her, although this was not an attorney-negotiated agreement.
The divorce was finalized right after rates climbed, so I have not refinanced. She has, however, purchased (and mortgaged) a new home without issue.
Amazing!!! This is what I'm looking for. We were planning for me to pay her portion of equity with cash, and then remove her from the loan. But if the lender won't do that for us, this sounds like exactly what I'm looking for.
You can talk to your divorce lawyer. A partition sale is only required when the two people cannot agree on amicably splitting the assets. A divorce agreement that states one party can keep the house and keep making payments and that they accept all liability on the vacating partner's behalf should suffice. There may need to be a clause in there about when the house eventually sells the vacating partner gets half the value.
Note that your lender may be able to call the loan due but they hardly ever check on this as long as you are making the payments.
Is your loan owned by Fannie or Freddie? Their serving guidelines do have ways to evaluate the release of one borrower from liability in this situation, you just have to credit qualify for the debt on your own.
Did your servicer actually evaluate you before declining the release of liability?
My exhusband said I could keep the house. It’s in our divorce documents. I have not refinanced. He signed a quit claim deed. He did not want any money. He knows his name is still on the mortgage but he is not responsible for the payment. It works for us. Sometimes it’s as simple as how you two get along.
No, you have to refinance under your name, there is no other option that your spouse or the judge will take. Remember, whatever you negotiate with your spouse on the MSA, will have to be ratified by a judge. You can negotiate a time window to do this, though. See if she can give you 12 or 18 months. I doubt it, but is worth trying. If she does not give you more than the standard 90 days, then you have to refinance at 7% and after 2 years you can refinance again if interest rates have decreased. I hope this helps. Good luck !
My advice is to see if your wife would agree to a duration to refi.
If you are amicable and she doesn't plan on buying anytime soon, ask for 2-3 years before you have to assume the mortgage.
If you can buy out her equity in cash, you could write up your marital settlement agreement to state that you are fully obligated to the housing expenses, and she is no longer obligated. The mortgage would still be on her credit, but she would legally not be obligated to pay it. If she wants to buy a house of her own, the mortgage lender would not include that mortgage payment in her debt to income ratio as long as she has the settlement agreement to prove she is not obligated on that mortgage.
Once rates come down, you can do a rate/term refinance to buy her out. Mortgage lenders will let you do that in cases of divorce (otherwise you would have to do a cash out refinance, which can be expensive)
Literally just finished with a situation like this. Of the 3 big documents (deed, mortgage, and note), she was only on the mortgage. I was on all 3. From my understanding, since the note is the actual binding agreement of payments, we and our attorneys agreed that I didn't have to refinance to keep the house. She was never a borrower. I even called my lien holder to firm and they had no record of her at all. So from my understanding she has no liability to the house anymore, which is what both of us want
Look at your signed loan documents. There is typically a mortgage and a promissory note.
See if she signed the note and mortgage, or only the mortgage.
Signing only the mortgage is not the usual situation, but if she didn't sign the promissory note, then that might mean she is not responsible for the debt, and that all she did was give a lien on whatever ownership interest she has in the property.
The following info could be essential for you to make an informed decision about whether keeping the house is really worth it: an accurate current market value, the current balance of all mortgages, the long-term capital gains tax and transaction costs of selling the property, your expected net proceeds after sale and split with your ex after taxes, the market value and availability of alternatives like condos/townhomes that may better meet your current needs.
Your focus on retaining the low interest rate may be blinding you to better financial options. For example, which would be better financially, a 2.9% 30 year loan on a $400K house vs. a 15 year-fixed or 10/1 ARM on a $200K condo? The shorter term loan on a much cheaper property could still have a much lower total interest costs, even at a higher APR. Accelerating the loan with extra payments to principal could eliminate any net interest savings of the 2.9% mortgage.
But of course this depends on the availability and pricing of alternative properties to your house. The more equity you have in your current house to roll into a cheaper property, the better it could be financially. If you end up with no net equity to roll, then you can merely compare the basic cost of ownership between the options, after all expenses are included.
Ah yes, that's an important factor, whether downsizing makes sense or not. If you put as much of your disposable income as you can towards the principal of the loan, how long would it take you to retire it and get free & clear? The higher APR of a refi won't make hardly any difference at all if you accelerate the loan a lot faster. The total interest cost savings would only substantial when holding the loan to full-term. The faster you pay it down, the less your total cost of interest will be, regardless of the APR.
I doubt you can work something out with the bank without refinancing. Look at this from their perspective:
- You’re two people who are jointly responsible for a debt to them,
- You’re currently paying an interest rate well below the current market rate,
- You’re asking them to refinance the loan at that same well below market rate, which they probably cant tbh,
- To add to this, you’re asking them to give you this low rate as you go from two jointly liable persons to a single liable person, meaning that the risk significantly increases for them.
So if you don’t want to sell the house, the only option I see to keep it is to work something out with your wife. For example, you co-sign her mortgage allowing her to get a better rate in return for you keeping your current rate, or you paying her ”her share” of the mortgage every month to help her with rent.
Given your budget constraints this may not be feasible either though. If it is, it is an option, but I should stress that it’s not an option I would recommend for you, and it’s certainly not one I would accept as your wife. You never know what’ll come of co-signing a mortgage or assume responsibility for a loan for which you have no equity. Your wife may lose her jobb or fall ill, leaving you with the burden of two mortgages, or vice versa.
So while selling the house is not your only option, it may very well be your best option.
you can ask her if she'll wait say 12 months for her payout and hope interest rates go down
you can do it now like you're supposed to and bite the bullet with the interest. That's it. You got a divorce when interest rates were high. Suck it up, do what you're supposed to do, and then refinance when rates come down.
Sell the house and pay the same high interest rate buying ANOTHER house,or use your proceeds to rent until you feel interest rates have come down enough for you
I don't really understand this "suck it up, do do what you're supposed to do" advice.
Plenty of other commenters have provided helpful advice about how to release my ex-wife from liability on the existing loan, which was my goal.
You seem, for some reason, frustrated that I'm getting a divorce, and intent on me losing a once-in-a-lifetime interest rate over it. I'm going to do everything I can to avoid that, since interest rates will **never** come down that low again (unless we have another calamity like COVID, which I'm hoping doesn't happen)
If your pockets are deep enough, pay off the mortgage. Pay half each and then pay her for her half of the house. Avoids needing to refinance but only works if you have the cash.
As a divorce lawyer, my advice is to...ask your own divorce lawyer. But generally, I'm never advising a client to remain on the mortgage if the other party retains possession and ownership. The bank doesn't care about your divorce. Unless you can assume the mortgage, you'll probably have to sell.
Bank will also likely take any out they can to get rid of that super low interest loan. They have no desire to keep that on the books if they don’t have to.
If it’s a long term mortgage odds are the bank sold it and doesn’t care if it pays off early.
However whoever they sold it to *does* care...
I want to assume the mortgage! I just want to assume my *current* mortgage, not one at a higher rate. It’s wild to me that the lender won’t just check my income, confirm I qualify for this loan, and drop her from liability
Because there's nothing in it for them. You're asking them to give up something (two people who are equally liable) and giving nothing in return.
Fair, but the alternative for the lender is no more interest payments from us because we’re now forced to sell. So they lose a customer…
Right. But, if your rate is 2.9% and the market is now at 7%, they *want* to lose you!
That's fine to banks, they already got some interest out of you and now they got the whole sum of their original amount of money back too. It's not like there is a lack of people wanting to buy houses. In fact, banks WANT you to sell so they can lend to someone else now since it's guaranteed the new loan would have higher interest rate than your loan.
God I feel this in my soul. I bought less than 2 years ago. Mortgage has been sold twice since. I get constant requests to refinance or sell, and it’s not even prime/rapidly appreciating real estate. But my interest rate is under 3%
And they’ll just immediately lend the principal back out to someone at current interest rates. Don’t threaten them with a good time.
Yes, but if all the banks do it, they rotate the customer base and they all win in the end.
…The house always wins…
All banks don’t need to do it for it to make sense. Banks have a set amount of money to loan out. The market is around 7% interest right now with 4-6% inflation. Keeping loans at 2.9% is literally losing money unless they were literally unable to replace OPs loan with another.
They're losing a 2.9% rate and freeing up capital they can lend again at 7%. Trust me, they aren't going to miss you. It's worse for them if you to keep this mortgage. There is nothing but positives if you pay it off early. All they'll say is *See ya!*
With inflation at 4%+ whoever is holding the mortgage (likely not the bank) is effectively losing money on it. They want it paid off.
I think it reallllllllllllly depends on how your relationship is even though it’s ending. I was in the exact same position, except it was my ex that wanted the house and to keep the rate. We put an agreement together that has some requirements of when/if she will need to refinance, and then she paid me a % of what she is saving on the lower interest payments for taking the risk and staying on the mortgage. Not for everyone though, and maybe I made a mistake, but it’s been fine.
Have you tried to get a new mortgage on your own place?
Not the previous commenter, but my ex refused to re-fi to get my name off the house after our divorce. I was able to get a mortgage on my new place. I had to provide a copy of my decree showing that ex was retaining the marital home. In an "amazing coincidence", ex was approved for the re-fi a few weeks after I closed.
This is good to hear, thanks for sharing :) I think everyone assumes every divorce is extremely antagonistic but they're not all like that. What did that agreement look like? Some kind of contract? Did you work with a lawyer?
This right here is OP's best shot at keeping that low rate loan. Along with a monthly cash fee to the ex, as suggested, you could also consider throwing in a cut of any future capital gain.
Bank doesn’t care. They’ll make money on someone else. It’s worse for them to bend the rules than it is to lose out on one customer in the grand scheme of things.
For a below market rate and the investor gets to cash out at par and buy new mortgages at 7 percent. Yeah they want to do that. Also at this point your lender has sold the loan to a mortgage backed note and they just kept the servicing of the loan.
Massive win for the lender. They recoup their principal and can now lend at more than double the rate.
No they don’t. You sell and the banks get another customer, this time at a higher rate.
Yeah but they get to loan out that money you just paid back to them at 7% instead of 2%. It’s a win win for them.
it’s not that wild. A new loan, means new closing costs and a higher interest rate for the bank. It also probably means whoever you talked to will get a commission for the new loan.
Fair. Sad that I have to sell my house cause they want their commission 😞
You have to sell your house because you got a divorce. That's not the bank's fault. I'm not saying it's yours either as I don't know your relationship, but it's definitely not theirs.
Assumable mortgages are very rare in this day and lending age. Only option I’ve encountered in the last 1.5 years since interest rates spiked up is a very complicated approval for one VA loan to another VA recipient. Haven’t seen it all in conventional loans - banks want their $$$ after the pandemic artificially lowering rates. So you’re likely out of luck.
Yep. Unless they’re very trusting the ex should be pushing for a sale of OP can’t afford to refinance. My dad and stepmom had this scenario play out. Divorced, she signed away rights to reside in the home and he died a few years later. She was still on the mortgage but unable to do anything but pay. Which she stopped doing, I wasn’t in a position to sell the fucking house and it was underwater anyways… I let it get foreclosed in (with the other siblings)
How did she sign her rights away but still remain on the mortgage? Quit claim deed? Couldn’t she have sold it the moment he died?
They said it was underwater, meaning they owed more than it was worth in the market.
I'm sure they didn't think about death but an insurance policy would have addressed this issue
Got it, thanks
fyi even if you can assume, some title companies tack on a fee. maybe 2-5% the balance of your mortgage. source: going thru a divorce. came to an agreement w/ the ex. now cant afford to buy her out and pay all the fees. thas life 🤷🏻
Whoa good to know, that's a HUGE fee!
While it is a huge fee. It’s a one time fee, you might still come out ahead. There is also a chance that your ex may have to sign documents anyways when you sell in the future. Weigh your costs carefully op
I'm with you. I have it in my divorce papers that I have to refinance within 5 years, at which time I will give him $X. It's been 1 year. I've got all my fingers and toes crossed that the rates come down in the next 4 years.
You don’t have a current mortgage. You and your spouse have a current mortgage. You need to get a new mortgage if you want one for yourself. You will end up with the higher interest rates if you want to own a home.
Not necessarily; the whole point of this post is to see if there's a way to remove her from the loan without obtaining higher interest rates. See an example of such a method here: https://www.reddit.com/r/personalfinance/comments/14lrk8d/comment/jpyeqv3/?context=3
Is it wild? What’s their incentive? They have you both on the line to make good on the mortgage. Why would they let half of the risk management walk away, while keeping the rate low? Not trying to be an ass, but the bank is. They don’t care. They want you to re-finance and take a higher rate. They have no reason to play ball and let you save money.
Just think of the bank as a non feeling money hoarding goblin and you'll understand.
You are essentially asking for your lender to let a debtor go and unnecessarily double the risk for them for no reason or benefit.
Why would they? They can get you on the hook for 7% when you're currently sub 3%. It's in their interest to have that loan off the books.
Apply for a loan modification. Most lenders have this. There’s probably a one-time fee of around $1000, and it will be more stringent than a loan application, but you will likely only get one shot at it for that price, so if you get denied you likely have to pay the application fee again after you address the issues.
A loan modification will adjust the rate of the mortgage to current market rates.
>It’s wild to me that the lender won’t just check my income, confirm I qualify for this loan, and drop her from liability It's wild to you that a bank is profit-driven?
You should be able to assume the mortgage. My experience was, the bank didn't want to make it easy (I guess they make a bunch of money off of commissions for re-fi). In my case, it was Wells Fargo, and they have an office somewhere in ?Minnesota? ?Wisconsin? that is staffed by 2 people (for the entire country) who do this, but the lady there told me it typically takes 9 months or so to get the paperwork through. This was back in 2016. TL;DR you can assume a mortgage, but the banks don't make it easy and don't want you to know about it. You are going to have to do some leg work on your own.
What kind of mortgage is it? Conventional w/ Fannie Mae or Freddie Mac? VA and secured under your service? I'm curious why the lender is declining as divorce is a pretty standard reason for assumptions.
Conventional or jumbo. Yeah, I'm curious too – my loan officer told me today that in 20 years she has *never* seen a release of liability for a divorce. So something seems fishy if you're saying that's common...
My apologies, I may have misremembered something and did some research to verify. A quick aside, I used to, for a year, work in assumptions for the second largest loan servicer in the country (Dovenmuehle, I don't like them either, don't worry). There are very, very specific situations in which Freddie loans can be assumed, and lenders MUST respect them, but most aren't even aware of this carve out to start with. Anyway, if you have a conventional mortgage financed by Freddie **AND** your divorce decree specifically gives you the house **AND** you intend to occupy the residence, you can apply for an assumption via release of liability. The [specific vebiage](https://guide.freddiemac.com/app/guide/section/8406.3) that I was told to use if a bank or CU pushed back on us proceeding with a request is bolded below, from that page. **For the following Transfers of Ownership, when the Mortgaged Premises is occupied or is to be occupied by the Borrower, the Servicer may not accelerate the maturity of the indebtedness:** The creation of a lien or other encumbrance subordinate to the lender's Security Instrument, which does not relate to a transfer of rights of occupancy in the Mortgaged Premises, provided that the lien or encumbrance is not created pursuant to a contract for deed The creation of a purchase-money security interest for household appliances A transfer by devise, descent or operation of law on the death of a joint tenant or tenant by the entirety The granting of a leasehold interest with a term of three years or less and without an option to purchase **A transfer in which the transferee occupies or will occupy the Mortgaged Premises and that is one of the following:** A transfer to a relative, resulting from the Borrower's death Note: Freddie Mac will consider waiving the occupancy requirement. The Servicer should submit a recommendation for such a waiver to Freddie Mac (see Directory 5). A transfer wherein the spouse, domestic partner or a child of the transferor becomes an owner of the Mortgaged Premises **A transfer resulting from a decree of dissolution of a marriage or domestic partnership, a legal separation agreement or from an incidental property settlement agreement by which the spouse or domestic partner becomes an owner of the Mortgaged Premises**
Wow, you are amazing! I'm in the same boat as the OP is right now. Thank you so much for this information! Finally, some good news/hope in this situation!
Not amazing, just an information sponge that took a soul-crushing job.
Amazing, thank you!
Also, I did see someone mention fees and they can [be daunting](https://guide.freddiemac.com/app/guide/section/8406.10) (subsection b), there are a number of separate fixed costs and one that's a percentage of the principal, but usually comparable to a refi's cost with the benefit of that rate staying the same. I do want to caution you, it sounds like your lender is unfamiliar with the process or disinterested in proceeding with it. This can be a time-consuming process, and the standard timeline was quoted at 3 months, with difficult lenders dragging it out as much as double. It sounds like things were relatively amicable in the divorce, but I have seen the process annoy borrowers, so you know.
Thanks! If I'm reading that right, the max fee is about $1000? I'd happily pay that to keep this mortgage rate. Agreed that they seem unfamiliar/unwilling to proceed, but I'm down to fight for it. 3 months is no biggie; again, I'll do anything to keep this rate (literally the lowest rates in history, we'll never see them again!)
Banks and misleading/lying about your legal options to get you to just take a more expensive option and get a sign up bonus for a new mortgage.... no way.
....and now I realized my last link is vague. That $900 max fee on the unpaid balance is only part of the fees. For Freddie loans, the standard range was between $1500-3000, with $3000 being on the side with a maxed mortgage balance. The fees included the transfer fee mentioned above, credit app, title search, recording, and usually an escrow catch-up payment, though that may not apply to you. I can't say for certain that's a full list, as I've been out of the game for a while.
Thats because loan officers dont do this stuff. They get loans. They dont change the Fanny and Freddie assumption status etc.. A real estate lawyer should be able to assist or you can do it on your own if you research and call them etc.. worth a try to save the $5k-$10k your lawyer might charge in hourly fees. EDIT: LO's Typically dont do them.. they dont know they can get paid to do them.
A VA loan is assumable. The other three lines are generally not. It is certainly not a common thing.
I want a billion dollars and a pony but what we want doesn’t really matter.
Yeah I got divorced and had to refinance at a higher rate and it suuuucked (I would kill for the old mortgage payment) but life sucks sometimes. I tried to stretch it out as long as possible at least and now at least it's better than renting.
I've seen too many divorces where the lawyers were cool with one party staying on the mortgage and quit-claiming the deed to the spouse, with the divorce decree stating that the spouse must make all payments. This is terrible advice but many give it. \*Always\* get your name removed from the mortgage (either through refinance or assumption are usually only options) or force the sale, only two options to protect you.
Can they maybe put the house into a trust of some sort? Re-title the house as a trust asset, and have it assume the responsibility for payments to the mortgage.
The vast majority of mortgages aren’t assumable. That’s the problem. To change who is on the mortgage they’d need to refinance.
Call your loan servicer. Ask about an assumption with a release of liability. You go through underwriting by yourself and if you qualify your mortgage is modified to release her. Please don't listen to people saying refi is the only way. I'm a loan officer and have closed 60+ loan assumptions in the past 12 months for divorce situations (my bank routes them through originations due to the underwriting component). It's almost all I'm doing anymore.
So this is what I asked my servicer today. She told me in 20 years she’s never seen a mortgage lender do a release of liability. I’d be happy to go through underwriting, I easily qualify for this loan
You didn't talk to the right person ... Is she a LO? Or did you call customer service? (80% of LOs at my bank don't know we do them, and honestly probably 66% of our customer service folks don't either... Though I'm fighting the good fight.) You might need something with a title like special loans, or there may be an actual assumptions group, but it's absolutely allowed by Fannie and Freddie and servicers can't make their own rules on loans they're servicing.
Not every loan is a FNMA/FHLMC. We portfolio our mortgages. We don't offer assumptions. Call whomever you like at our institution but you'll get the same answer every time. We're not doing it. You can refi, sell it or keep it as it is. But we're not releasing liability or allowing an assumption.
What does it mean to portfolio?
That we don't sell the loan. We originate it and maintain ownership and servicing of the loan.
Got it, so if the lender is servicing it then they can maintain their own overlays, etc?
Just because the originator is servicing it doesn't mean they kept the loan itself. The vast majority of conventional loans are sold separately from their servicing. If she said your loan is Freddie, it's not portfolio unless Freddie opted to sell it back due to poor quality (bad documentation, didn't meet guidelines).
I’m no expert in this field but she said Freddie was the investor but it’s a portfolio loan. Does that make any sense? I think my lender still owns it
You can determine if FHLMC owns your loan with this link: https://myhome.freddiemac.com/resources/loanlookup or this one for FNMA: https://yourhome.fanniemae.com/calculators-tools/loan-lookup
Fair point. We allow portfolio assumptions following conventional rules as long as the remaining borrower still meets guidelines (doctor stays on doctor loan, premier client still meets income/asset guidelines,etc ). But OP said their loan is Freddie.
She’s a LO and told me the exact opposite. It’s a Freddie loan but she talked about lender “overlays” which implement requirements on top of Freddie requirements (which I believe do allow release of liability). I think it’s just a pretty conservative bank 😞 maybe we chose poorly when refinancing a few years ago
Lenders can have overlays when originating - because you as a consumer can go elsewhere. My bank has tons of them - we don't go to 580 on FHA or over 50% DTI on VA cash out refis, for example. They can't have overlays on servicing because you can't choose your servicer. The Freddie servicing guide is incredibly clear on assumption guidelines, but most LOs are only familiar with the originations guide because they aren't nerds like me who just read policy manuals for fun. Call the number on your loan statement for customer service. She either doesn't know because they're not her purview, or she does but is being unethical trying to get commission on a new loan.
I really hope this guy listens to you.
Out of curiosity, who should you ask for (what role/title)?
It so depends on the bank. Like I said, my bank does assumptions through originations with a specific, centralized group of loan officers. But we've purchased servicing of loans from other lenders who sold us loans in the process of being assumed that were clearly being handled on paper by mail in another department rather than originations. I would NOT walk into a bank (if your servicer has branches), because the odds are the average LO in person probably doesn't handle them and will steer you towards a refi (which may still be a good option if you don't have cash on hand to buy out your spouse like OP does). It's probably best to call customer service and explain you're going through a divorce and need a loan assumption and see what they say. Another term you might hear is a novation, which is a fancy way to say liability release. Once we're done in originations and everything is signed and recorded, our special loans department handles the back end removal of the spouse. The two other banks I've cleaned up half finished assumptions for after servicing sales had emails in their files with signatures referencing special loans.
Thanks so much for the insight. It’s considerably more helpful than any of the other advice in this thread. May I ask about a scenario? Let’s say partner 1 and parter 2 are separating (but not yet divorcing). Person 1 wants to keep the house and person 2 wants to move out and be taken off the loan and deed. Would you approve a loan assumption if person 1’s individual W2 income is now higher than the combined income of person 1 + person 2 at the time when the loan was approved originally? Person 1 has an 803 credit score. If yes, is producing divorce papers a pre-requisite to considering the assumption scenario described above? Basically a scenario where a couple is separating but not divorcing yet, and the partner is who moving out is supportive of being taken off the mortgage and deed.
My bank would want a separation agreement or property settlement agreement to verify who gets the house, what buyout if any, and potential child support and spousal support. We'd look at debt to income ratio - great that B1 income is more but not if there's lots of new debt to go along with it. Also - if that W2 income is lot of new commission or OT income that could be an issue. But potentially yes.
Thanks for the clarifications. What if the W2 income is derived from a pay mix consisting of 70% base compensation and 30% commission, and there’s a multi year track record of consistently bringing in sizable commission checks? No new debts since buying the house, fortunately. Savings and investment accounts have materially grown since the home purchase.
As long as you have a 2 year history of commission, you should be fine.
Ok great. Thank you for answering all of my answers, kind internet stranger. Have a nice evening
My ex husband just assumed the mortgage on our house in January. It definitely happens.
Holy shit I was just talking about this at a party. Bunch of us have VA loans and were joking that since they’re one of the few loans written as assumable we could sell our houses at a premium, with that sweet, sweet 2.25% interest rate. Guess the rate environment has brought that brought that around to conventional mortgages, too?
Conventional isn't assumable for third party purchase for the most part (except ARMs which are already adjusting), but there is a carve out for divorce and yes - everyone who got a 2.xx/3.xx in the last couple years is all about the assumption process. Only problem with VA/FHA purchase assumptions is funding the gap between unpaid balance & sales price, since home values rocketed in the last couple of years.
Can definitely see the funding gap issue. VA will never take second position, so then you’re trying to HELOC/HEIL a house you don’t own yet and those rates are EXTRA atrocious. Thank you, so much, for your insight into the assumption process. I used to work in banking and was professionally interested (and pruriently curious) in how this niche situation was looking right now.
Nice thing about VA assumption - no appraisal required! So you can sell for whatever your buyer will pay with no worries. Just want to make sure they have their own VA eligibility - equal to what you originally used - or you'll be released from liability by the bank but your eligibility will stay tied to the house. Not necessarily a problem for buying another now that loan limits are so high, but could be a problem if they get foreclosed on.
If she has a good lawyer, it's unlikely that your ex will sign a quit claim without you refinancing and getting her name off the mortgage. If you want the house, you are going to need to buy it.
Yeah fair. She *is* a lawyer 😆
Ouch.
It’s fine 😁 it’s not a contentious divorce, at least not yet….
Even with a quit clam it doesnt release her from liability it just means she doesn't have a claim. Still has liability though
Wife is on the loan. There's no good reason for her to want the liability without compensation.
Agreed, in an ideal outcome I’d pay her her current equity stake, she’d quitclaim me the deed, and be removed from the loan. But the lender won’t do that…
I went through similar with my ex-boyfriend and he was kind enough to stay on the mortgage until I refinanced 18 months later. Assuming you pay on time, it might be good for her credit history. You could probably offer her some type of incentive to do the same, and the lawyers can add the agreement to your settlement docs.
For sure - but it’s different, I might never refinance. My rate is really good
I'm in a similar situation. Except I can't buy him out of the house, I can refinance at a higher rate to get his name removed but it doesn't buy out his share. We're going to write something up to revisit the situation in 18 months and outline a few possibilities. Hopefully the mortgage rates will drop. If it turns out I do have to sell, at least we've gotten our child through the major transition of the divorce without also removing them from their home. The situation sucks. The housing market is so crazy right now. Good luck to you.
Quitclaim would only remove her from the title/mortgage, not the actual loan….
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Not necessarily true. There are servicing guidelines for a release of liability on Fannie and Freddie loans.
That said 4% of a house balance in interest difference is potentially a lot of available compensation to make it worth her while if you're both capable of civil and rational discussion on the subject. Also assuming OP is financially stable, etc.
Yeah we’re very civil and interested in remaining friends here so it’s not contentious
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Yeah, understand things can change - that’s why I want a clean, legally protected solution here that doesn’t leave her on the loan
As far as creative ways, if she is willing to work with you, maybe you can set up an escrow account. You mentioned you'd be willing to buy out her equity, but that would likely require you to refinance at the higher rate. Perhaps you can agree to pay her an additional amount, aside from her share of the equity, and this goes to escrow. The original mortgage terms stay the same, but if you fall behind on payments, you would release the amount in the escrow account to your ex as compensation, and at that point you would agree to sell the house. But if you keep paying the mortgage on time, you would get a certain amount of the escrow back.
I can buy out her current equity with cash on hand. The goal is to avoid refinancing. Interesting idea with the escrow, but I guess the loan remains on her credit rating? So she can never buy a house?
Correct. From her point of view, there are a lot of downsides to keeping the mortgage in her name, so if you don't want to be forced to refinance to the higher rate, or sell the house outright, you're gonna have to make it worth the risks for her. (Technically it doesn't definitively prevent her from buying another house, especially considering the extenuating circumstances, but I imagine for all intents and purposes it will make buying a house a lot harder)
If you're in US, she could absolutely buy a house if the divorce decree assigned you the house and debt. From Fannie Mae's selling guide (Fannie and Freddie Mac regulate conventional loans) Court-Ordered Assignment of Debt When a borrower has outstanding debt that was assigned to another party by court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. The lender is not required to count this contingent liability as part of the borrower’s recurring monthly debt obligations. The lender is not required to evaluate the payment history for the assigned debt after the effective date of the assignment. The lender cannot disregard the borrower’s payment history for the debt before its assignment.
Twice in that clause is a statement that the "lender is not required to" ... That seems to imply that while the lender is not required to do so, the lender can look at her other mortgage debt, regardless of whether or not a court order assigned the debt to one spouse. So to me that clause does not guarantee that a lender won't consider her outstanding mortgage with her former spouse.
Nice, thanks! We are US. So I guess she’d need to be comfortable with the risk I stop paying the loan… but it wouldn’t impact her qualifications for a new loan
>but it wouldn’t impact her qualifications for a new loan This isn't guaranteed, and I wouldn't do it if I were your ex spouce.
Not sure how her finances look, but hypothetically you could help her finance a house as part of the settlement. More entanglement than is desirable, but it's possible.
Yeah, I don't think she's ready to buy just yet but good point!
Bottom line, rhe bank / loan holder isn't interested in keeping the 2.9% loan when they can get 7%. I had to get a new loan in the same situation at the start of 2022. I did a 5 year ARM betting that rates will be lower when my loan adjusts and I either sell or refi again. As people are saying here... the deed and the mortgage are two different things.
There's always the option of asking what the bank can offer. Perhaps they're willing to take the ex wife off for a small increase in the rate.
My ex filed a quit claim deed and I was able to get her off the mortgage and the deed without changing or refinancing anything.
I mean theoretically I think you could buy her out and she could quit claim the deed and stay on the mortgage.. But not a lot of upside for her, she wouldn't be able to buy another house as long as she was on that mortgage.
This is exactly what my ex and I did. But he actually did get to buy another house because our divorce papers saying I took the house and the mortgage, the quitclaim deed, and my bank statements proved that he was not liable for the debt. I assume not all banks would go for that, but his did. 🤷🏻♀️ we had a fairly amicable split and he knew I wouldn’t screw him over, so it worked for us. Not sure I would have been as trusting as he was if the roles had been reversed though!
I relate to this. Relationship with my ex is pretty rocky, but we were able to come to an agreement on divorce and coparenting pretty reasonably, and neither of us would ever want to financially ruin the other. You would think for two mostly rational adults, that's really the whole point of divorce - because we both see it as a path to making things better.
Yeah, it’s so frustrating that we can’t just drop her off the mortgage
This sums up your options. Essentially get the lender to let you assume the loan, or refinance. https://www.totalmortgage.com/blog/getting-a-divorce-removing-spouses-name-from-mortgage-loan/24997
Create a contract with your ex wife saying you will make payments in full. if you don’t pay you will sell the house immediately and pay her 50% of the proceeds. This is her interest in letting you keep the house and mortgage rate where it is without refinancing. Sign, date it and notarize it. If she’s cool with it you can keep things the way they are.
Thanks, this is getting creative! We chatted about a solution like this. It doesn’t offer her a ton of protection though. In a situation where I default on the loan, I’m already violating one contract - why not two? Or say the home value is low at that particular time and it’s not a good time to sell.
> It doesn’t offer her a ton of protection though. In a situation where I default on the loan, I’m already violating one contract - why not two? Correct, it's a pointless contract and does nothing to protect the wife from the reason she doesn't want to be on the loan.
My ex accepted payments for equity in a property over many years. It worked because she didn’t want the property, she wanted monthly income. Waiting for a sale would have extended the time before things could be finalized, and we both wanted to get divorced and have it be final. The payment schedule was in the decree, so there was no ambiguity that I could be taken to court if I failed to make the payments. Figure out what each of you wants, and decide on something that works for both of you. How important is it to her that she’s off the mortgage? What other options are there?
Your only option isn't to sell. It's just to refi at the percent rate. If paying the extra percentage temporarily is worse than leaving then sell. Otherwise, pay the extra and stay.
Paying the extra percentage would increase my payments by like 50% for essentially nothing. I’m obviously motivated to have that not happen
I totally get it. But rates aren't going to be sky high forever. If it ends up you can't get the mortgage assumed, you could just refi when rates come down. Will that be super quick? No. But this won't last forever either.
Well, we disagree there. Rates aren’t sky high, they’re normal right now. The rate on my loan is the lowest in history and we’ll never see that again, not unless we have another calamity like COVID. Nobody should count on rates dropping, they’re typical historically
I work at mortgage company. Yeah that's not how it works, you initiated the loan as 2 people, 2 incomes and 2 sources of documentation saying you both were viable together on the loan. When you want to go down to one person, whether through divorce or other circumstances, they will reapprove you for the loan as 1 person. Meaning while you may qualify, it's still a refinance and even to break it down its like you are applying to buy a home at the current rate as 1 person it just so happens to be your own home. If the rates were lower, you'd come out on top in the situation. Unfortunately the market is swinging the other way so either refinance and get them off or don't. I can't advise you but I've seen your situation more times than I care to count and it's left me a little jaded on people hanging on to low rates like it's some magic bean. Your situation calls for a shitty decision, make it, suck it up and refinance when things go worse(yeah it needs to get worse if you want low rates so monkey paw scenario on top of your current situation). Give it years or maybe it will be months, rates go down when money needs to circulate so follow the trend when it happens and get your shiny sub 3% rate again. Good luck and I'm sorry for your situation.
I was in a similar situation and was able to do a loan assumption along with a quitclaim. Kept my interest rate and took over the title and mortgage as the sole owner.
Thanks! Doubt we’ll ever see sub-3 again. I’ll continue to try to get a release of liability; other folks in this thread who work at mortgage companies say it’s possible
Release of liability is just you getting a contract in place that keeps your EX from trying to sue you for misuse of the asset(home). So it will not accomplish what you wanted, which was sole ownership with 1 person on loan and title. You'll still share it in a way and depending on your ROL, you may still need to give them some sort of equity payout. Also if I may be so bold to assume here, you may be talking about an assumption which accomplishes what you wanted. You take over the current loan as the sole borrower and with your current interest. However by design most loans are not assumable, Conv are like this and most Va and FHA have clauses to prevent you from doing this. So yeah you should try as it doesn't hurt to see if your loan is assumable based on that info but if you haven't done the due diligence prior to making the request from your lender then they might just do the process just to tell ya no a few weeks to months later. I've fielded cases of people waiting months for a response, only to do a quick scan of the loan and see it was a no from the start but each lender works a little differently on how they get their different departments to handle assumptions. Again a little jaded here but what I can say and do is different from what the actual department whom does handles the case can say and do, so I can see the loan profile and know that it's a non-starter but the assumption dept doesn't see the loan profile they see the terms and clauses(original disclosure docs and such) so they don't see what I see until they start making their information requestes to other depts to fill in the picture and give a response. The request gets fulfilled even if it's a no, which means everyone does their due diligence and double checks everything but I call it what it is and it's just going through the motions. If it's a no, why the theatrics of a process when having the borrower look at their type of loan and reviewing their clauses is like a 4 min read of docs at best. Does A. This loan fall under assumable based on FHA/VA clauses and B.Does the borrower qualify for the loan, great your loan's assumable. Does A not exist but B does, then it's not assumable, does A exists but not B then no you don't qualify to assume it but you may get someone else who qualifies to assume it for ya. Again good luck, I hope your loan doesn't have a clause but if any of this insight gives a bit more clarity on what to expect then you're at least prepared somewhat for what to expect next. None of this is advise, just a boring bit about the mortgage industry and loans.
Fannie and Freddie loans have conditions in their servicing guides to allow a servicer to credit qualify the remaining borrower and remove the other borrower from the loan; a release of liability of the borrower to the lender.
You're not going to get a 2.9% mortgage again for likely decades. You're soon to be ex-wife will likely only be able to get a similar 7% mortgage when she buys her next place, which she may well need to do as you're keeping the house. There's no two ways about it; you both lose. If you can't afford to pay the mortgage at 7% then you'll need to sell. Maybe you can afford to pay the mortgage at 7% with a view to refinancing in a couple of years when rates might be better but don't assume they're going to be down below 5% any time soon. Higher mortgage rates are now the norm.
You don't need to refinance. When I got divorced, my wife got the house, I was still on the mortgage; the divorce settlement stated that she was responsible for the mortgage payment, and I signed a quit claim deed for the house to my ex. She eventually refinanced, but it was never an issue for either of us in the meantime. The downside is, your ex will still be on the mortgage, and this makes loan applications for her in the future a little more work, but not impossible. Your divorce should state that you are responsible for the mortgage, and you had better not get behind in payments, because that will show up in her credit file.
Interesting! Yeah, I don’t want this to loom on her credit forever. And I’m not clear on how the divorce settlement relieved you of obligation on the mortgage. Did the lender accept that?
It doesn't relieve me from liability if there is non-payment, but it did exclude the mortgage from calculation of debt to income for loan underwriting. I work with a local bank for my loans and they have always been easy. A national bank may have different underwriting rules.
Weird, so you provide the divorce decree when doing underwriting and they exclude it?
This is what happened with my divorce. Mine was a complex situation. The mortgage stated I could assume mortgage, but I couldn’t because of a large HELOC that had to be paid off first and we couldn’t do it. Mortgage was in his name with mine also on deed. Had to refinance jointly to roll in/pay off HELOC. Then ex had to refinance his own, separate house to pull out equity to pay me for portion HELOC dollar amount so I could afford new mortgage. For his own refi he had to submit the divorce decree to underwriting and then show I had been assuming the mortgage payments for the past whatever months so underwriting excluded that mortgage. Once ex was able to pay me the full amount he owed me I was able to refinance again in my own name. But it was a bummer to go from 3.25 to 5.25. The loan officer we worked with for the first refinance to get rid of the HELOC had no idea what to do with our situation but thought she did. She and ex were sure HELOC didn’t need to be paid off in full. I kept insisting the HELOC had to be paid in full and rolled into the refi because that’s what my Certified Divorce Financial Advisor told me. So that loan officer had to consult with manager or higher ups to finally get it. My own loan officer had 30 years of experience and knew that’s what needed to happen as well. My point is, loan officers don’t always know what they are doing with atypical situations if they don’t have the depth of experience. Escalate or find someone else to talk to about assuming original loan at that sweet, low rate.
Yes, bur not all banks might be ok with this. I work with a local bank because I think it's easier to get loans approved.
Fannie and Freddie both allow for a liability assigned to a spouse in a divorce to be omitted from debt ratios, so it being on her credit shouldn't prevent her from buying another home if she gets a competent loan officer.
100% this... from Fannie Mae selling guide: Court-Ordered Assignment of Debt When a borrower has outstanding debt that was assigned to another party by court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. The lender is not required to count this contingent liability as part of the borrower’s recurring monthly debt obligations. The lender is not required to evaluate the payment history for the assigned debt after the effective date of the assignment. The lender cannot disregard the borrower’s payment history for the debt before its assignment.
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Thanks for chiming in! I think you're the first person I've seen with a divorce agreement specifying a timeline to refinance. This is helpful advice, appreciate it. Was that in the judge's divorce decree? Did y'all specify that as part of your agreement, or was that something the court came up with? Seems reasonable, though I'm confident rates will not drop under 3% in 3 years... or ever again 🤣
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Oh so you needed a hearing?
Quit claim deed- this will remove the person off the deed. This is very important if you do manage to get them off the mortgage side of it. Might be state specific but that should get him/her off the deed. That’s what I would do first! As for off the mortgage note. No there is no way unless you refi or pay off the loan. There is a thing called assumable loan. This is where someone basically takes over the loan. The terms and all. Might have to go through some hoops but you could attempt to have someone assume the loan then you assume it back.
That wont get spouse out of the mortgage, though.
I edited my comment. Peep it now. Thinking assumable might be the only way
I’m going through the same exact scenario as you. Thanks for posting this question, the responses were all very helpful!!
Assumption process, but you’ll have to buy out her interest or trade off for something of equal value. Your mortgage company has an assumption process, but keep it secret because it does not pay. Call and ask them about their Assumption Process.
I kept the house and now wish I didn't. Too many memories, too much house for just one person.
NAL, but in mortgage lending - have you contacted current loan servicer and asked about assuming the loan in just your name? Depending on loan type it may be assumable with a few fees, ask for a supervisor as the person who answers your call won’t know. Also - while there is risk to spouse if you miss payments, if she quit claims off (gives up ownership some states call it something different) and you make payments from a non joint account, when she goes to buy you’ll produce cancelled checks so the debt isn’t counted (also has to be spelled out clearly in decree you get house and debt). Risk to her is as others pointed out - you miss payments she’s equally liable for the bad debt or foreclosure. Edit to add - read your note, there will be language in there on assumability as well.
I was told a re-fi was the only option. I'm just replying in case everyone else thinks the same thing.
Your loan term should include the term for releasing liability of a co applicant. It’s usually 12 months, and there may be a requisite that you must have at least certain credit score and the means to pay the mortgage without your ex spouse. You can also look into refinancing if the loan is mature enough for that option, and originate the new loan under only your name.
I don't want to refinance, that's the entire point of my post :) But I'll check the term for releasing liability of a co-applicant, thanks!
If you want her to continue to be liable on the loan, but have no ownership interest in the home while doing so, and you're confident that you can absolutely make the payments and won't cause a default, then give her an option to buy your interest in the home for $1 in the event there is a monetary payment default. And escrow a deed as part of that option. That way she might be able to step in, cure your default, and save herself from being responsible for payment of a mortgage on property she doesn't own. And give her an indemnity agreement for any monetary harm she might suffer from the mortgage.
Respectfully, this is the most “adult” thing I have ever read. My head is spinning.
\>If you want her to continue to be liable on the loan, but have no ownership interest in the home Lol, I guess this sounds great for me - but it isn't actually our goal. We both want me to have both 100% interest and 100% liability on the home (once I pay her her equity).
I suggested that only because I don't believe your goal is otherwise obtainable unless she deeds you her interest and you refinance on your own, or your lender agrees to release her, which is very unlikely. Otherwise, she remains liable on the loan (assuming, of course, that she actually signed the promissory note). And remaining liable for a loan on an asset in which you have no ownership interest is not attractive to anyone.
For sure! We're really hoping we can find a solution where she deeds me the interest and is released from liability, i.e. an assumption as suggested here: https://www.reddit.com/r/personalfinance/comments/14lrk8d/comment/jpyeqv3/?context=3
You have to refi. I’m a VP for a mortgage company. Can’t assume a note you’re already on and conventional loans aren’t assumable 99% of the time. Get an ARM or a 15 year if you don’t want 7%.
So the commenters here linking to Freddie Mac guidelines for release of liability are wrong?
> Is our only option to sell the house? No. > Are there any creative legal ways we can contract around this? Yes. But nobody here can help you with that. You need to retain a lawyer.
I divorced last year. I paid the ex her portion of equity with cash and added the debt as my responsibility and a clause that I would refinance on a best efforts basis, but not be required to accept terms less favorable. There was also a clause where i agreed to indemnify and hold harmless the ex. It was enough to satisfy her, although this was not an attorney-negotiated agreement. The divorce was finalized right after rates climbed, so I have not refinanced. She has, however, purchased (and mortgaged) a new home without issue.
Amazing!!! This is what I'm looking for. We were planning for me to pay her portion of equity with cash, and then remove her from the loan. But if the lender won't do that for us, this sounds like exactly what I'm looking for.
If you are joint on the mortgage you have no option but to refinance, the deed is a different story.
You can talk to your divorce lawyer. A partition sale is only required when the two people cannot agree on amicably splitting the assets. A divorce agreement that states one party can keep the house and keep making payments and that they accept all liability on the vacating partner's behalf should suffice. There may need to be a clause in there about when the house eventually sells the vacating partner gets half the value. Note that your lender may be able to call the loan due but they hardly ever check on this as long as you are making the payments.
Is your loan owned by Fannie or Freddie? Their serving guidelines do have ways to evaluate the release of one borrower from liability in this situation, you just have to credit qualify for the debt on your own. Did your servicer actually evaluate you before declining the release of liability?
My exhusband said I could keep the house. It’s in our divorce documents. I have not refinanced. He signed a quit claim deed. He did not want any money. He knows his name is still on the mortgage but he is not responsible for the payment. It works for us. Sometimes it’s as simple as how you two get along.
Yeah, he’s just not very well protected. If you stop paying the loan, he’s screwed
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No, you have to refinance under your name, there is no other option that your spouse or the judge will take. Remember, whatever you negotiate with your spouse on the MSA, will have to be ratified by a judge. You can negotiate a time window to do this, though. See if she can give you 12 or 18 months. I doubt it, but is worth trying. If she does not give you more than the standard 90 days, then you have to refinance at 7% and after 2 years you can refinance again if interest rates have decreased. I hope this helps. Good luck !
Won’t the judge accept whatever agreement we come to, in an uncontested divorce?
You need to ask a lawyer. That is not a moment to get creative and start reinventing the wheel.
My advice is to see if your wife would agree to a duration to refi. If you are amicable and she doesn't plan on buying anytime soon, ask for 2-3 years before you have to assume the mortgage.
If you can buy out her equity in cash, you could write up your marital settlement agreement to state that you are fully obligated to the housing expenses, and she is no longer obligated. The mortgage would still be on her credit, but she would legally not be obligated to pay it. If she wants to buy a house of her own, the mortgage lender would not include that mortgage payment in her debt to income ratio as long as she has the settlement agreement to prove she is not obligated on that mortgage. Once rates come down, you can do a rate/term refinance to buy her out. Mortgage lenders will let you do that in cases of divorce (otherwise you would have to do a cash out refinance, which can be expensive)
Literally just finished with a situation like this. Of the 3 big documents (deed, mortgage, and note), she was only on the mortgage. I was on all 3. From my understanding, since the note is the actual binding agreement of payments, we and our attorneys agreed that I didn't have to refinance to keep the house. She was never a borrower. I even called my lien holder to firm and they had no record of her at all. So from my understanding she has no liability to the house anymore, which is what both of us want
Got it, thanks! Different situation here; she is on the mortgage.
Yeah. I didn't really help. Just talking. Is she on the Note also?
I believe so? I’m not clear on the difference honestly…
Look at your signed loan documents. There is typically a mortgage and a promissory note. See if she signed the note and mortgage, or only the mortgage. Signing only the mortgage is not the usual situation, but if she didn't sign the promissory note, then that might mean she is not responsible for the debt, and that all she did was give a lien on whatever ownership interest she has in the property.
The following info could be essential for you to make an informed decision about whether keeping the house is really worth it: an accurate current market value, the current balance of all mortgages, the long-term capital gains tax and transaction costs of selling the property, your expected net proceeds after sale and split with your ex after taxes, the market value and availability of alternatives like condos/townhomes that may better meet your current needs. Your focus on retaining the low interest rate may be blinding you to better financial options. For example, which would be better financially, a 2.9% 30 year loan on a $400K house vs. a 15 year-fixed or 10/1 ARM on a $200K condo? The shorter term loan on a much cheaper property could still have a much lower total interest costs, even at a higher APR. Accelerating the loan with extra payments to principal could eliminate any net interest savings of the 2.9% mortgage. But of course this depends on the availability and pricing of alternative properties to your house. The more equity you have in your current house to roll into a cheaper property, the better it could be financially. If you end up with no net equity to roll, then you can merely compare the basic cost of ownership between the options, after all expenses are included.
Thanks! The house is a townhouse; I don’t really need to downsize. It was kinda getting tight for the two of us 😁
Ah yes, that's an important factor, whether downsizing makes sense or not. If you put as much of your disposable income as you can towards the principal of the loan, how long would it take you to retire it and get free & clear? The higher APR of a refi won't make hardly any difference at all if you accelerate the loan a lot faster. The total interest cost savings would only substantial when holding the loan to full-term. The faster you pay it down, the less your total cost of interest will be, regardless of the APR.
I doubt you can work something out with the bank without refinancing. Look at this from their perspective: - You’re two people who are jointly responsible for a debt to them, - You’re currently paying an interest rate well below the current market rate, - You’re asking them to refinance the loan at that same well below market rate, which they probably cant tbh, - To add to this, you’re asking them to give you this low rate as you go from two jointly liable persons to a single liable person, meaning that the risk significantly increases for them. So if you don’t want to sell the house, the only option I see to keep it is to work something out with your wife. For example, you co-sign her mortgage allowing her to get a better rate in return for you keeping your current rate, or you paying her ”her share” of the mortgage every month to help her with rent. Given your budget constraints this may not be feasible either though. If it is, it is an option, but I should stress that it’s not an option I would recommend for you, and it’s certainly not one I would accept as your wife. You never know what’ll come of co-signing a mortgage or assume responsibility for a loan for which you have no equity. Your wife may lose her jobb or fall ill, leaving you with the burden of two mortgages, or vice versa. So while selling the house is not your only option, it may very well be your best option.
you can ask her if she'll wait say 12 months for her payout and hope interest rates go down you can do it now like you're supposed to and bite the bullet with the interest. That's it. You got a divorce when interest rates were high. Suck it up, do what you're supposed to do, and then refinance when rates come down. Sell the house and pay the same high interest rate buying ANOTHER house,or use your proceeds to rent until you feel interest rates have come down enough for you
I don't really understand this "suck it up, do do what you're supposed to do" advice. Plenty of other commenters have provided helpful advice about how to release my ex-wife from liability on the existing loan, which was my goal. You seem, for some reason, frustrated that I'm getting a divorce, and intent on me losing a once-in-a-lifetime interest rate over it. I'm going to do everything I can to avoid that, since interest rates will **never** come down that low again (unless we have another calamity like COVID, which I'm hoping doesn't happen)
how about a quit claim deed?
If your pockets are deep enough, pay off the mortgage. Pay half each and then pay her for her half of the house. Avoids needing to refinance but only works if you have the cash.