Obtaining a joint mortgage is often easier than qualifying for a mortgage on your own. Applying for a mortgage with another person lets you combine your incomes so you can qualify for a higher loan amount, and the lender will consider both borrowers' credit scores when reviewing the application. However, once you and your co-borrower agree to a joint mortgage, removing either name from the loan can be difficult.
When you sign a joint mortgage note, you and your co-borrower are agreeing to repay the loan in full over the term listed on the document. If you stop making your payments, the lender can foreclose on the property and bring legal action against both you and the co-borrower for any balance that remains on the loan. However, if the lender takes one of your names off the mortgage note, that person is no longer responsible for the mortgage and cannot be sued if the debt isn't paid. For this reason, lenders won't typically remove a name from an existing mortgage.
According to "The New York Times," some lenders offer an option known as "release of liability" for joint borrowers who want to remove a name from their mortgage. If your lender offers this option, you can ask the lender to remove one borrower's name from the mortgage in exchange for a fee. Before approving a release of liability, most lenders will check the credit of the borrower who will stay on the loan to make sure he is capable of making the payments on his own.
If your lender won't agree to a release of liability, you can remove one borrower's name from the mortgage by refinancing the loan. To obtain a refinance, the borrower who wants to remain on the mortgage must be able to qualify for a new loan to replace the old one. Before approving the refinance, the lender will check the borrower's credit and income. The lender might also order an appraisal of the home to make sure that it hasn't fallen in value since you obtained your original mortgage.
Release of liability isn't available if you owe more on your home than it's worth. According to "The New York Times," fees for a release of liability typically range from 3 percent to 6 percent of the outstanding loan balance. It's also possible to release one borrower's liability for a joint mortgage through bankruptcy. If that borrower files for bankruptcy protection, he will no longer be responsible for the mortgage debt. However, filing for bankruptcy is harmful to your credit score and may prevent you from qualifying for a new mortgage for up to four years after receiving a Chapter 7 discharge and two years after receiving a Chapter 13 discharge, according to the Nolo website.
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