What are reasons to remove your name from a mortgage?

On Behalf of | Nov 21, 2022 | Property Division

With divorce now a real possibility for you, you must consider the fate of your marital home. If you no longer want the residence, it is possible you might sell it or perhaps your spouse will want to keep it. If the latter scenario seems more likely, you should consider how to get your name off the mortgage.

Certain consequences can result if your name remains on the mortgage even though you no longer want to bear responsibility for the property. Bankrate explains why continuing to stay on a mortgage could create problems for you.

Liability for missed payments

Even if a court hands down a divorce decree defining how much of a marital debt you should pay, your original loan contracts remain in effect unless you change them. Basically, even if you and your spouse work it out that your spouse will be responsible for the rest of the mortgage, you could still be liable for missed payments if the mortgage lists you as a guarantor.

A large DTI ratio

After divesting yourself of your marital home, you might consider taking out a new mortgage on another residence. Staying on your current mortgage could cause problems because banks will likely factor it as part of your debt-to-income ratio. If your DTI ratio is too high, lenders might not approve you for another loan.

If your spouse refinances your marital home, you could possibly get your name removed from the mortgage. However, your spouse will need sufficient financing to qualify for a new mortgage. Trading some additional martial assets to help your spouse receive a new mortgage might come up as an option during divorce negotiations.