Why your lender can't just take a name off
When two people sign a mortgage, the lender approved the loan based on both of them. Each is fully responsible for the debt. Taking one person off means the lender would be relying on less income and credit, so lenders rarely agree to simply drop a borrower. In most cases, you'll need a new loan or a formal approval process.
Your main options
- Refinance in one name: the remaining borrower takes out a new loan that pays off the old one
- Loan assumption: some loans, often FHA, VA and USDA, can be assumed by one borrower with lender approval
- Release of liability: a few lenders and loan types allow one borrower to be released, if the other qualifies alone
- Sell the home: the loan is paid off at closing, and any proceeds are divided as you agree or as a court directs
Refinancing into one name
A refinance replaces the shared loan with a new one in the remaining borrower's name. It's the cleanest break, since the other person is no longer tied to the debt once the old loan is paid off.
If you need to pay the other person for their share of the equity, a cash-out refinance may let you borrow against the home to do it, subject to equity and program rules.
CapCenter's ZERO Closing Costs (restrictions apply) covers lender and covered third-party fees on a refinance. Prepaid interest and escrow deposits still apply, and if the deed changes, government recording fees or taxes may apply where you live.
Title vs. loan: two different things
The title, or deed, shows who owns the home. The mortgage shows who owes the money. A quitclaim deed can transfer one person's ownership to the other, but it doesn't change who owes the loan.
If someone signs over the deed but stays on the mortgage, they're still responsible for the payments and the loan still shows on their credit. That's why the loan and the title usually need to be handled together.
Qualifying on your own
The remaining borrower needs to qualify alone: income, monthly debts, credit and the home's value all count. You need a credit score of at least 620 for a CapCenter loan. If you'll receive alimony or child support, it may count as income in some cases once it's documented and expected to continue. A loan consultant can review your numbers before you commit to a plan.
Divorce and separation
A divorce decree or separation agreement may say who keeps the home, but it doesn't change the loan by itself. The lender isn't bound by your agreement. Make sure the agreement sets a timeline for refinancing or selling, and talk with an attorney about how to protect both of you.
