Q: About eight years ago, my ex-fiancée and I purchased a home together. The deed is in both of our names. Since then we’ve gone our separate ways. But she still resides in the house and I’ve paid the monthly mortgage payment.
We do not want to do anything that would jeopardize the loan terms and in particular the 5 percent rate we got on our 15-year loan. Our loan balance is only about $65,000 now. I’d like to transfer my share of the home to her and I’m still willing to accept the financial obligation either directly to her or the bank for the mortgage.
The issue is that although she has a great credit history and score, I am not sure the bank would transfer the current loan to her since she’s self-employed and does not have a high enough income to qualify on her own.
I’d like for her to own the house, but I’m willing to continue to provide pay the mortgage and other expenses, however I wish to be relieved of the day-to-day home responsibility. I understand that if my name stays on the loan then I’ll have financial obligation.
How do I go about investigating our options and who should I initially talk to? Any guidance or help is greatly appreciated!
A: You’ve paid off a great deal off the original balance on your loan and interest rates on 15 year loans are at or below the rate you got 8 years ago. Have you sat down with a mortgage lender to see if she would qualify on her own? If she does, you might want to have her apply for a new loan and when she refinances, you could take your name off the deed.
If your name was off of the title to the home, you would not have any financial attachment to the property other than your desire to continue to assist your ex-fiancée in making monthly mortgage and some other of the monthly payments on the home.
But be careful not to remove your name from the title to the property while you’re still listed on the mortgage. Right now, you control the property and she can’t sell it or refinance it without your consent. However, if you transfer title to her, she could transfer title of the property with or without your consent and even get money from the sale but allow a buyer to keep the mortgage which you have been paying.
In other words, you could end up with continued liability on the mortgage and she could end up not even living in the home.
You indicated that your loan balance was now only $65,000. Each monthly mortgage payment pays down the loan balance even more. Because you had a 15-year loan, a substantial portion of each payment is principal and relatively little is interest.
Have you considered paying off the mortgage entirely and then getting off the title? Do you have the funds to do that? It seems that your intent is that you pay for the home and that she ends up as the sole owner of the home. If that’s the case, you can consider the option of getting or changing the financing on your current home and paying off the debt on her home.
Beyond this, you and your ex-fiancée should sit down and discuss what she is capable of paying for, what she wants to pay for, and what you can pay for. The discussion should include an exit strategy for you.
Talk to a good real estate lender in your area to assess your options. Rates on loans are still low and you may find that she can qualify on her income given the relatively low balance left on the mortgage.
One last item: has the value of the home stayed steady? If it has, it will make your life easier if you decide to refinance. If you live in an area in which values have decreased substantially, you may find it hard to refinance the home in any event.