Removing a Person From a Mortgage – Pros and Cons
Mortgage transfers aren’t just a fantastic idea after you’ve tied the knot. They’re a smart way of saving money by combining your refinance with your partner’s mortgage and then taking out a fresh loan to pay off the original one. After all, it’s awfully easy to get into a debt trap where you spend money you don’t have on useless things. What’s more, your partner’s interest rate may be higher than yours, so refinancing could end up costing you more in the long run. So, why not just tie the knot and take out a mortgage? Here’s how:
There are two primary reasons for a mortgage transfer. The first is to avoid a costly divorce. When you and your spouse separate, there’s going to be a good bit of property to divide – a house, a condominium unit, land, etc. Some of this property may belong to each of you, so it will be necessary to divide it equally before dividing up the assets. A divorce lawyer can help you sort out the specifics of the property and determine which half of the property should go to each party.
If you both want to go through with a mortgage refinance, then separating your finances is a great way to avoid a divorce and the financial ramifications that come with it. But it’s important to realize that mortgage transfers aren’t something you can do just to avoid a divorce; they’re a logical step in a long series of events that must be completed in order to move forward. If you’ve already decided that divorce is a course of action you want to pursue, then refinancing is simply a means to an end. Of course, if you and your spouse are already married, then it’s probably time to get serious about remarrying!
If your relationship has soured and you’re now considering a divorce, there are two ways to approach your situation. You can convince yourself to go through with a mortgage transfer, or you can seek the advice of a licensed California real estate broker, like says segura. According to says segura, “A mortgage transfer will work in California only if the mortgage lender agrees that part of the loan is for one party only. Other lenders may not agree to such a transfer, so it is important to shop around and check with several different lenders.”
Some lenders do allow mortgage transfers after separation, but it’s important to contact them first. Says segura, “Don’t assume that any of your lenders will be willing to make such a transfer. You should speak to them about it, and you may even have to request this from them. A mortgage transfer isn’t very popular with most lenders because it gives one partner control over another. But it can be very beneficial if you are able to convince a lender that your income will continue to support you once you remarry.”
According to California law, once the mortgage transfer has been approved, the new loan amount is to be repaid to the original borrower. This is done by depositing the money into an escrow account. The new lender then pays the mortgagee, and all is well. If not, the mortgagee can choose to pay the mortgage amount as stated in their new loan contract, or get out of the deal.
According to Seegura, sometimes the original borrower may wish to retain the title to a certain property as security for the mortgage transfer. This would allow the borrower to remain in the property as long as they want. He or she would just need to make monthly payments towards the property taxes. However, California law states that this can only happen when the homeowner is living in the property, and it has to be “tangible” property. As long as the borrower lives in the house, the mortgage transfer is null and void. Even if the borrower dies, the mortgage transfer is still valid, as long as it was made between the borrower and the lender.
Although the removal of a person from a mortgage can have negative effects on his or her credit rating and future finances, it is very important for borrowers to take their time when considering a mortgage transfer. Although this process can be tedious and expensive, it is the best way to prevent foreclosure. It is also better to consult with a professional before making any big decisions regarding your finances. A good credit counselor will be able to answer any questions you might have about removals, and provide you with valuable information regarding remortgages, credit checks, and the like.