Mortgage Video & Blogging Community

This site gets questions about mortgage items and I answer the ones that I feel are the most interesting to me and hopefully to others. This one has to do with a jointly held mortgage when the people are no longer joint. This can happen anywhere, not just in the Eugene/Springfield Oregon area. Here is the question:

Can A Co-borrower Be Taken Off A Mortgage Easily?

February 24, 2010

Me and my ex-girlfriend (girlfriend at the time) bought a house together. We had some trouble with our relationship and she is now moving out and would like to be off the loan (giving full ownership to me). Can that easily be done? or will i have to take out a separate loan to pay that one off? It’s an FHA loan it that helps.

NO!

The quick answer to this is no and it doesn’t matter if it is FHA or not. Basically, we run into this quite often when a couple divorces and the divorce decree says that one or the other gets the property in the settlement agreement. Recently, there has been quite a bit of squabbling about this because neither party wanted the property with no equity. However, the simple truth is that a civil decree cannot change a contract. Your husband or wife may be responsible for the payment according to the divorce decree, but both will continue to get the payment reported to the credit bureau and in case of a foreclosure, both get the detriment of the action.

The same is true for our questioner above. Even though it is boyfriend and girlfriend and not a married couple, it is still a joint obligation. The main difference is there is seldom a separation agreement with boyfriend/girlfriend. The only way to remove the co-borrower is to refinance the loan and that will mean prequalifying, not a streamline process. There are some work arounds for people trying to get a new mortgage when there is one showing up on their credit that is the ex’s responsibility, but they are not simple to do.

Talk to each other

My advice, is to be certain that the co-purchaser of that dream home, is really someone that you plan on spending a long time with. Most home loans are for 30 years. Is your relationship that strong? We are not a community property state, so it is possible for one partner in a marriage to purchase a home individually, and often when one partner has better credit, that can be a good idea. However, I always counsel my clients as to what they are getting into, especially if they are going into a joint transaction and currently have not combined their worlds. Purchasing a home can be very stressful, it is best to discuss the future first. Additionally, if you are filing a separate tax return, it is my understanding that you would each qualify for a $4,000 first time home buyer tax credit if neither of your had owned a home for the past three years.

Contact Me

Find out today what you can afford to purchase. Get pre-approved before you start looking for your new home. FHA is a great way to purchase a home but have the experienced help you need to get it done. You can reach me (Fred Chamberlin) at 541-342-7576/541-221-3455 cell or by e-mail. Alpine Mortgage Planning is located at 1200 Executive Pkwy., Ste. 100, Eugene OR 97401. I am your local lender. Call today.