Dear Dr. Don,
I would like to know how to take out a borrower's name (from) my mortgage. My parents' names are both on the mortgage. Now that they are separated and on the verge of divorcing, my dad wants his name to be removed from the mortgage.
My mom, on the other hand, wants to keep the house and continue to pay for it. Would they have to do a refinance to get this done? Thanks for all the help.
-- Concerned Cece
Dear Cece,
I'm sure this a difficult time for you and your family. As you point out, the financial aspects of a divorce often have a long-term impact on the family, too.
You're describing one on the thorniest issues in a divorce. The divorce decree may spell out who gets the house and what is to be done with the mortgage. But since the mortgage lender isn't a party to the divorce decree, it doesn't have to abide by its terms.
A refinancing is the easiest way to accomplish your father's goal of not being responsible for the loan payments. The current lender won't agree to take his name off the mortgage if his income was part of what qualified your parents for the loan.
To refinance with just your mother named on the loan, she has to qualify for the mortgage on her income. It's possible that another family member would agree to co-sign the loan with her and that would help her qualify for the mortgage if her income isn't sufficient to qualify on her own.
You didn't mention what state your parents live in, but in community-property states, a loan taken out by one spouse is the obligation of both spouses, regardless of who is named on the loan. That could be an issue if the refinancing took place before the divorce was final.
Community-property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and the territory of Puerto Rico. Alaska also allows married couples to opt in to community-property status.
The divorce attorneys, or a real estate attorney, can help your parents sort through this and other issues concerning the home.
The Bankrate feature "10 steps to a money-smart divorce" provides a nice overview of the financial issues that come about in a divorce. The Federal Trade Commission's Facts for Consumers publication "Credit and Divorce" also has tips on keeping credit in shape during a divorce.