Navigating a mortgage with an uncooperative co-owner can be challenging, but Talkov Law’s partition attorneys have mastered the art of helping unsatisfied co-owners break the cycle of disagreement with a partition action. This article explores methods for disentangling oneself from the mortgage agreement by removing your co-owner.
3 Quick Fixes to Try
1. Check if the Mortgage is on Co-owner’s Credit Report
Generally, a mortgage will appear when a lender retrieves your credit report. If your co-owner’s name is not on the credit report, they are not liable for the mortgage. Generally, there would be no reason to remove them from a mortgage if their credit was not used to obtain the mortgage, i.e., their name is not on the mortgage.
2. Ask the Lender Directly to Remove Co-owner
Typically, when two borrowers share a mortgage, they bear joint and several responsibilities, meaning each is individually accountable for the entire loan amount. For instance, in a $250,000 loan, both borrowers are liable for the full $250,000, rather than splitting it into $125,000 each. If one borrower cannot fulfill their obligation, the other becomes responsible for the entire loan balance. While calling your lender and asking to remove your co-owner may seem straightforward, lenders are cautious about removing a borrower from a mortgage, as it offers them no benefit and significantly increases their risk exposure.
3. Call the Lender and Ask About the Mortgage’s Liability Clause
Liability clauses are uncommon in mortgage agreements, but worth a try to ask. In some instances where the mortgage contract does have a liability clause, the lender retains the authority to reject a request to remove one borrower from the loan. This would be the simplest method.
4. Assumption of the Mortgage by One Co-owner
Assumable loans allow for the existing mortgage to stay in place with the removal of one or more borrowers, and potentially the addition of a new borrower or simply the removal of one of the borrowers, usually a co-owner who is selling their interest in the property. Assuming a mortgage would be beneficial if rising interest rates have made a refinance too costly. Indeed, even if an assumption is available, the assuming co-owner must still meet loan qualifications, such as a debt-to-income ratio.
For those considering an assumable loan as a solution, sometimes called a refinancing, the co-owner assumes the mortgage will need to qualify based on their debt-to-income ratio. Lending Tree reports that “conventional loans are rarely assumable,” while loans with less than 20% down are sometimes assumable. A great resource to ask about assumable loans is your lender.
What Are Your Options if You Can’t Get a Co-Owner Removed from Mortgage?
If the easy fixes don’t work, there are some other solutions.
1. Refinance the Mortgage
When you refinance your home, you obtain a new mortgage that replaces your current mortgage. Rather than the funds going to the home’s seller, the new loan amount is used to settle the remaining balance of your existing mortgage. Your repayment obligation is then based on the terms and amount of the new mortgage. Since refinancing your mortgage creates a new contract with the new lender, a co-owner can be the sole party contracting with the new lender. However, refinancing is not always an option following the the increase in mortgage rates that occurred in mid-2022. .
2. Sell the Property
If your bank declines to remove your co-owner’s name from the mortgage and you are unable to qualify for refinancing, another option is to sell the property. Selling the property offers a constructive solution for co-owners to terminate their joint mortgage arrangement. The sales proceeds that pay off the joint mortgage allow a co-owner to exit an unhappy co-ownership relationship and acquire property independently.
3. Partition the Property
If your co-owner refuses to sell the property and removing your co-owner’s name from the mortgage is feasible through refinancing, consider formal legal action by filing for a partition. Partition actions will effectively end the co-ownership arrangement, allowing for a division or sale of the property that reflects each owner’s contributions and interests. In California, “if the party seeking partition is shown to be a tenant in common, and as such entitled to the possession of the land sought to be partitioned, the right is absolute.”[1]Bacon v. Wahrhaftig (1950) 97 Cal.App. 2d 599, 603.
A partition in California law may unfold in three manners: partition in kind, partition by appraisal (or under the Partition of Real Property Act), and partition by sale. The law encourages a partition by sale when “(1) a division into subparcels of equal value cannot be made, or (2) a division of the land would substantially diminish the value of each party’s interest, such that the portion received by each cotenant would be of substantially less value than the cash received on a sale.”[2]Right of partition—Partition by a sale of the property, 4 Cal. Real Est. (4th ed.) § 11:17
Furthermore, if your original goal of removing the co-owner from the mortgage was to end the co-ownership, simply removing your co-owner from the mortgage will not automatically revoke their ownership rights.
Warning: A Quitclaim Deed Does NOT Take Your Name Off the Mortgage
If your co-owner ever asks you to sign a quitclaim deed to remove yourself from the mortgage, be aware that signing a quitclaim deed will relinquish your interest in the property without absolving you from the mortgage obligation. Unfortunately, by executing a quitclaim deed and relinquishing your interest in the property, you may also forfeit your ability to initiate a partition action. This means you may be stuck on the mortgage for decades to come.
Give Talkov Law a Call Today
Removing an uncooperative co-owner through a partition action is the best possible solution to remove your co-owner from sharing your liability and get out of a troubled co-owner relationship. A partition action can be more straightforward than refinancing or assuming a mortgage when you have Talkov Law’s partition attorneys providing the guidance and representation you need. As California’s foremost experts in partition action, having Talkov Law’s partition attorneys by your side means legal strategies tailored to maximize your benefits. For a free consultation, call (844) 4-TALKOV (825568) or reach out online today.
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