The title or deed of a home is a legal document filed with the local city or township office. It establishes ownership and protects the owner from invalid claims against the property. When you sell the home, the deed is legally transferred to the new owner.
When you purchase a home with a co-borrower, such as a spouse or parent, both names appear on the title. Removing a co-borrower from a title is a simple process itself, but certain circumstances can complicate matters.
If there is no mortgage on the home, you can simply file a quitclaim deed to have the co-borrower removed. Otherwise, you will likely need to refinance or sell the property to remove the co-borrower.
File a Quitclaim Deed
Sign a quitclaim deed if you have no mortgage on the property. A quitclaim deed is a simple document which both parties can sign to surrender the ownership rights of one deed holder and assign those rights to the remaining owners.
You can find a sample quitclaim document online, or you can write a simple letter to the effect that one party is giving full ownership over to the other. You may also hire a real estate attorney to do this for you. Have the quitclaim deed notarized to make it official.
Refinance the Home
If a mortgage remains on the property, refinance the home to remove yourself from both the deed and the mortgage. If you currently maintain a mortgage on the property, doing a simple quitclaim deed won't help you. It could even get you into trouble with the lender, since the lender might view a quitclaim deed as proof of a sale, in which case the lender could seek payment in full.
Additionally, a quitclaim deed will remove an owner from the title, but it doesn't absolve him from responsibility for the mortgage. Refinancing the mortgage is the only way to completely remove a former co-borrower from both the deed and the loan.
Pay Attention to Timing
One of the most common occasions in which one party removes himself from the deed divorce. If your former spouse gets to keep the marital home after your divorce, the court or your ex may ask you to file a quitclaim deed. It's risky, however, to surrender your ownership stake in the home while your name is still on the mortgage. Filing a quitclaim deed under these circumstances could force you to pay for a home you no longer own.
To solve this dilemma, ask your former spouse to refinance the mortgage in their name alone. Agree to attend their closing on the new loan and sign a quitclaim deed there. Doing so grants your ex full ownership of the home without risking your solvency. This strategy works well for business partners, parents and other co-owners and co-borrowers as well.
Consider Other Options
Unfortunately, a mortgage refinance isn't always an option. Your property co-owners may not have enough income or a high enough credit score to refinance the property without you. Contact your lender and inquire about other options if this is the case. Some lenders will modify the mortgage document to remove a co-borrower under certain circumstances, but your lender may charge a fee to modify the loan and can refuse to do so.
If refinancing is simply not an option and your lender won't play ball, consider selling the property. Use the proceeds from the sale to pay off the remaining mortgage. If there is any profit left, divide it among all the owners.