How to Remove Someone From a Mortgage Without Refinancing

To remove someone from a mortgage without refinancing, options include a loan assumption where the remaining borrower takes full responsibility, or obtaining lender approval to modify the loan and remove the person's name, often in divorce cases.

When you have a mortgage with good terms but need to change who is named on it, you might search for answers for how to remove someone from a mortgage without refinancing. The great news is, you have options, though the best option will vary based on your unique circumstances. Learn the ways to work with your lender to change the individuals named on your mortgage.

Can You Remove Someone’s Name From a Mortgage Without Refinancing?

There are many scenarios in which people look to remove another individual from a mortgage, including divorce, a co-signer wanting to be removed once you have established your credit, etc. Depending on your loan’s terms and rates, refinancing might be unattractive. You might end up with a higher rate and spend more over the loan term. 

Homeowners and co-signers can remove their names from mortgage agreements without the need to refinance or increase the loan amount.

You’ll start by reviewing your options. These will vary based on your circumstances, such as whether one of the named individuals wants to assume the loan.

Then you’ll talk to your lender to see what they offer as far as changing the names on a loan. You’ll need the lender to agree to the terms that you’re requesting.

Although you aren’t refinancing, there will still be ample paperwork involved. You’ll need to complete this paperwork to complete the loan modification and ensure that the other party is no longer named on insurance or taxes for a completely smooth process.

Five Ways to Remove Someone From a Mortgage Without Refinancing

Learn your options for adjusting your mortgage to remove another individual from it. Here’s a look at five ways of completing this process.

1. Secure Approval From the Lender

Your lender can remove a name from a mortgage without refinancing. The hard part with this is, it’s completely up to the lender to decide whether to allow this. The challenge is that lenders are not motivated to offer loan modification because fewer people listed on a loan means fewer parties to go after to collect funds should something go wrong.

An advantage to this option is that it is fast and simple if your lender approves it. A disadvantage is that you’ll still be going through financial scrutiny to see whether you can assume the loan yourself and have the necessary income to do so.

Most people choose this option when they have completed a divorce and have a divorce decree that shows the division of property. The lender knows there is no way they’ll keep both parties on the loan but you’ll still have to go through financial reviews.

2. Modify the Loan

Some lenders are willing to change the mortgage loan terms without a refinance. The most common use cases for loan modifications are changing interest rates or extending the repayment period. Both these items can make the loan more affordable.

But to qualify for these modifications, you often have to prove a financial hardship. Some lenders might consider a divorce or legal separation as a financial hardship. Just talk to your mortgage lender to see if this is an option.

The advantage is that this process is simple but the disadvantage is that it is not widely available and is up to the discretion of the lender.

3. Assume the Mortgage 

Certain home sales allow for assuming a mortgage with the existing loan terms. This can release one person from the loan, allowing the other to become the home’s sole owner. 

The advantage of this is that it is a fairly clear process. The disadvantage is that most conventional mortgages have a clause stating that they do not allow for a mortgage assumption. The lender can demand the full remaining balance in the case that a home is sold.

Individuals with a government loan and rare conventional loans that are assumable are ideal for this option when removing someone from a mortgage.

4. Declare Bankruptcy 

If one individual named on the mortgage files for bankruptcy and gets their debts discharged, it can be a simple way for you to assume the home without going through a refinance.

The advantage of this is that the bankruptcy event will provide an ideal opportunity to adjust the names on the mortgage. The disadvantage is that these scenarios are rare and if you are still married to the co-borrower at the time that they file for bankruptcy, the house is considered collateral that the bank can assume and sell as part of the bankruptcy filing.

This option is ideal for someone with a co-borrower they are not currently married to who is considering declaring bankruptcy to help them overcome dire financial strains.

5. Sell the Property

Neither party listed on a loan might want the home in some scenarios. If that’s the case, the best option is to sell the home.

The benefit of doing so is that then the parties can split the proceeds from the sale and be released from all liability and financial obligations related to the home. This is also a seamless way to ensure both parties no longer own the home. 

A major disadvantage of this option is when the mortgage is greater than the value of the home. This happens when a home depreciates or when you’ve taken multiple loans out on the house or failed to do upkeep on the house, making it worth less.

Consequences of Removing Someone From a Mortgage Without Refinancing

Before removing someone from your mortgage, make sure you understand the consequences that both you and the individual being removed will face.

Consequences for the person remaining on the mortgage include: 

• Payment burden: the remaining person on the mortgage will now need to make the full payment on their own. That also means that you’ll need to have qualifying income to get approved for the full mortgage amount. If that’s not realistic for you, it might be better to downsize than to try and remove the other person from the mortgage.
• Liability: now you’re the only person with liability for the mortgage. If you fail to make a payment or default on the loan, it could have devastating consequences for your finances.
• You might not have sole ownership rights: just because you remove someone from the mortgage doesn’t mean they no longer own the property. The deed will still have the other person named until you complete a quitclaim deed.

Consequences for the person being removed from the mortgage include: 

• No more loan obligations: regardless of what happens to the loan next, the individual who has been removed will have no obligations related to the loan. That means if the other party misses a payment or is late with a payment, it will have no impact on the removed individual.
• Changes to their debt-to-income ratio: the person removed will now have a lower debt-to-income ratio, which means they could qualify for new loans with greater ease or see an increase in their credit score.
• Maintain homeownership: just because the individual is no longer named on the loan, they might retain ownership of the home. While that might sound great, it could become a problem depending on how the other party cares for the home and uses it.

Why You Should Reconsider Refinancing

In most scenarios, the best way to remove a person’s name from a mortgage is through a refinance. Most lenders only allow for removing another person through a refinance. To qualify, you’ll just need to have sufficient equity in the home, have good enough credit to assume the loan on your own, and prove you have the income necessary to pay for the home.

When you complete a refinance, you’re setting up a new mortgage and the lender is using that to pay off the existing mortgage.

Refinance Requirements

Learn what you’ll need to qualify for a mortgage loan refinance.

• The new loan amount should be 80% or less of the home’s total value
• The borrower should have a credit score of 620 or higher for a conventional loan or 580 or higher for an FHA loan
• Your debt-to-income ratio should be lower than 45%
• You have a steady income, which can come from employment, alimony, child support, Social Security, etc.

Mortgage Refinance Pros and Cons

No matter your reason for removing the other person from the loan, you should be aware of the pros and cons of refinancing the mortgage.

Pros

• Option to shorten the loan term: if you’ve paid down a great deal of the loan, you could now get a 20-, 15- or even 10-year loan term. This will allow you to pay off the mortgage faster and often get a lower interest rate than you would with a 30-year plan.
• Extend the loan term: when you need a smaller payment, assuming another 30-year loan might make the most sense. That’s because it extends the term and lets you spread out payments for longer, which can free up some space in your budget.
• Reduce the loan’s rate: depending on when you took out the mortgage originally, you might be able to secure better rates today, which could help lower your monthly payments.
• Do away with mortgage insurance: if you didn’t have 20% to put down on the home at the time of purchasing, you might have been required to purchase mortgage insurance. Depending on the home’s value today and how much equity you’ve built in it, you might be able to stop paying for mortgage insurance.
• Funds to buy out the other party: if you’re removing someone from the loan because they will no longer live there, you can refinance the loan with a cash-out refinance to buy out the other party without having to pay the funds from your bank account.

Cons

• Loan qualification: when you take over the mortgage by yourself, it means you must qualify for the loan on your own. This can be challenging depending on your income and credit score.
• Closing costs: you’ll need several thousand dollars in closing costs to complete the loan. This includes origination fees, appraisal fees, and other costs. Depending on your loan’s value, it could cost upward of $10,000.
• Interest rate increase: depending on when you got your existing mortgage, a mortgage loan refinance could mean you pay more in interest. 

Retaining Your Mortgage Terms While Removing Another Person from the Loan

Ultimately, adjusting your loan in some way without a refinance to remove another person is ideal, as long as your lender is willing to do so. But if not, you could still get agreeable terms with a refinance and have the option to do a cash-out refinance to buy out the other party with greater ease.

Frequently Asked Questions