Life is unpredictable. It's easy to plan for the future, but things don't always go as planned. A great deal can change during the 30 years it typically takes to pay off a mortgage loan. If you need to retitle the mortgage, the process is generally simple. In most cases, you must refinance the loan. You will need to meet the lender's qualification requirements.
Need to Refinance
If you want to remove or add a borrower, you will need to refinance the mortgage. Even with a divorce decree releasing a spouse from the mortgage, refinancing is often required. If a borrower passes away, your lender may still require you to reapply for the mortgage loan. You can explore refinancing options at any time. Begin by checking with your lender. Shop multiple lenders to find the lowest interest rate. You can even hire a broker to quickly compare various lenders.
Process and Fees
The refinancing process is similar to the initial loan qualifying process. Your interest rate may change, depending on whether the current interest rate is higher or lower than your existing rate. You must meet certain credit, income and debt-to-income ratio requirements. If you don't qualify on your own, consider asking a relative to cosign. It is also possible to refinance a conventional loan to one from the Federal Housing Administration loan. FHA loans are backed by the federal government and are more forgiving when it comes to credit criteria. According to the Federal Reserve, you can also expect to pay closing costs of up to 6 percent of the loan amount. Your lender may also require you to pay for a home appraisal.
Assuming the Loan
If you don't want to refinance, you may be able to bypass the process and begin assuming the mortgage using a "novation." The interest rates and terms of the loan remain the same. You are basically just taking over the payments. The novation agreement assigns responsibility to just one party instead of both borrowers. Not all loans can be assumed. Even if your loan is eligible, the lender does not have to approve the request. Novations are typically reserved for borrowers with a high credit rating and sufficient income.
Changing the Deed
A mortgage assigns payment obligation, and a deed conveys ownership. After changing a mortgage, you will want to change the deed to match. If you don't remove a name from the deed, you are both owners of the home, even though you are the only one paying. A quit claim deed is a document used to add or remove a name. The original co-borrower signs off ownership rights on the deed. A new deed is then issued displaying the current owner's name. The quit claim is process is done at the closing.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.