Saturday, December 12, 2020

Loans And Mortgage

Loans And Mortgage

How to remove a name from a mortgage — with or without refinancing

Posted: 12 Dec 2020 06:42 AM PST

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Breaking up (with your mortgage) is hard to do

You're parting ways with a spouse or
co-mortgage borrower. You've agreed who will keep the house and take over
mortgage payments. But there's a problem.

In the eyes of your
mortgage lender, the "ties that bind" aren't legally severed until you remove
your ex from the mortgage.

Even when a couple
agrees that one person is no longer responsible for the mortgage, the lender
doesn't see it that way until the official records show it.

There are a few ways you
can take a name off a joint mortgage loan. The best way is usually to
refinance, which may be less of a hassle than you think. Here's what you should
know.

Check refinance options (Dec 12th, 2020)

In this article (Skip to…)

Why remove your ex's name from the mortgage?

You and your ex-partner might agree
on who will keep the house and take over mortgage payments.

But to a lender, you're both still
on the hook for loan repayment until your spouse's name or co-borrower's name has
been taken off the mortgage and deed.

As far as lenders are concerned, both people remain "jointly and severally" liable for the loan. In other words, the lender can come after both — or either — of you in the event of a default. And both of your credit scores will take a hit if your payment is late.

The only legal way to take over a joint mortgage is to get your ex's name off the home loan.

The same goes for a co-borrower
who no longer wants to be on the line for a mortgage they co-signed.

If you find yourself in the position of needing to remove your name or someone else's from a mortgage, here are your options.

1. Refinance to take a name off the mortgage

Refinancing is often the best way
to take a name off a mortgage. Depending on your lender, it may be the only
way.

If you have sufficient
equity, credit, and income, and your ex-partner agrees
to give you the house, you should be able to refinance.

To qualify, you'll need to show
the lender you have a strong enough credit history and monthly income to make
mortgage payments on your own.

Guidelines vary by loan program and lender, but refinancing a mortgage typically requires:

  • A credit score of at least 620 (conventional and VA loans) or 580
    (FHA loans) 
  • A debt-to-income ratio below 45%
  • Steady employment and income that will continue for at least 3 years

Those last two requirements
could be the toughest to deal with. If you weren't the main breadwinner in the
home, you may not have enough income to qualify for the loan on your own.

But here's a
tip: if you will receive alimony or child support, give your lender those details.
That income may help you qualify for the refinance. 

Verify your refinance eligibility (Dec 12th, 2020)

Pros and cons of
refinancing to remove a name from the mortgage

The obvious downsides to
refinancing are the time and cost involved.

You'll typically need to complete
a full mortgage application, supplying documents like W2s and paystubs to
support your financial information. Closing on a refinance loan typically takes
around a month.

And there are closing costs
involved. Refinance closing costs typically range from 2% to 5% of the loan
amount, which is no small sum if you have a large outstanding loan balance.

But there are ways to get around
closing costs.

When you refinance, you have the option to roll closing costs into your loan balance to avoid paying them upfront. Or you could opt for a "no-closing-cost refinance," where the lender covers some or all of your fees in exchange for a higher interest rate.

There may even be benefits to
refinancing your home.

Mortgage interest rates are at
historic lows. Refinancing might allow you to remove a name from your mortgage and
lower your interest rate and monthly payments. This could make the mortgage
more affordable for a newly-single homeowner. 

Even if you're well into your
loan term, you don't have to start over at 30 years.

You could potentially refinance
into a 20-, 15-, or even 10-year loan term to pay off your house on schedule.
Just note that a shorter term will have higher payments, which you'll be paying
on your own.

Compare refinance options to see
which program makes the most sense for you.  

Check your refinance options (Dec 12th, 2020)

Use a Streamline Refinance to reduce time and cost

If you have an FHA or VA home
loan, you may be able to use a Streamline Refinance to remove your partner's
name form the mortgage.

Streamline Refinancing typically
doesn't require income or credit approval, and you don't need a new home appraisal.
These loans often close faster and cost a bit less than a traditional refinance.
 

However, if you want to remove a
borrower from the mortgage using a Streamline Refi, credit re-approval might be
required. It depends on your situation.

  • The FHA
    Streamline     may allow you to remove a name without credit and income
    verification if the remaining borrower can prove they've made the past 6 months'
    mortgage payments or more on their own. If they can't prove they've been making
    payments on their own — or that they assumed the loan at least 6 months ago —
    they'll have to re-qualify for the new mortgage
  • The VA Streamline Refinance (a.k.a.
    VA IRRRL) may allow you to remove a name without credit re-verification. But
    the person remaining on the loan must be the VA-eligible veteran — not a non-VA-eligible
    spouse

USDA loans also have a Streamline
Refinance option. However, if you use the USDA Streamline Refi to remove a name
from the loan, the remaining borrower will need to re-qualify for the loan
based on credit and income.

Verify your Streamline Refinance eligibility (Dec 12th, 2020)

"Cashing out" the
spouse

You may have to "cash-out" your spouse, meaning you give them the court-ordered percentage of the equity in cash, for them to agree to be removed from the title.

In those cases, try a cash-out refinance.

Cash-out refinancing requires over 20% equity to qualify for the loan. But you'll need much more than that if you are trying to transfer, say 50% of the home's equity. Here's how that might look:

  • Home value: $350,000
  • Current loan: $200,000
  • Equity: $150,000
  • Cash to spouse: $75,000
  • New loan (not including closing costs): $275,000 (pays off existing
    loan and cashes out spouse)
  • Loan to value: 78%

This scenario would qualify since you need 20% equity remaining in the home after the refinance (that's a maximum loan-to-value of 80%).

However, many homeowners don't have this much equity in the home.

Though conventional and FHA cash-out refinancing cap your new loan-to-value ratio at 80 percent, a VA home loan may allow you to cash out up to 100% of your home equity.

Verify your cash-out refinance eligibility (Dec 12th, 2020)

Can you take a name off the mortgage without refinancing?

It may be possible to take a name
off the mortgage without refinancing. Ask your lender about loan assumption and
loan modification.

Either strategy can be used to
remove an ex's name from the mortgage. But not all lenders allow assumption or
loan modification, so you'll have to negotiate with yours.

If neither is allowed, a refinance may be your best and only bet.

2. Loan assumption

In theory, loan
assumption is the simplest solution of all.

You inform
your lender that you are taking over the mortgage and you want a loan
assumption. Under a loan assumption, you take full responsibility for the
mortgage and remove your ex from the note.

The terms and
interest rate on the existing loan remain the same. The only difference is that you are now
the sole borrower. (And if your ex is the one who got the house, your credit
and finances are protected if your former spouse fails to make payments.)

Be sure to ask the lender if
you can obtain a release of liability. This will eliminate your obligation to
repay the loan if your ex fails to.

The problem here is that many
lenders won't agree to a loan assumption. And lenders that do agree may demand
evidence that the remaining borrower can afford the payments.

In addition, a loan
assumption isn't free. It can cost one percent of the loan amount,
plus administrative fees of $250 to $500.

3. Loan modification

Loan modification allows you to
change the terms of your mortgage loan without refinancing. A loan modification
is typically used to lower the borrower's interest rate or extend their
repayment period to make the loan more affordable.

Typically, modification is only
allowed in cases of financial hardship. But some lenders may accept divorce or
legal separation as a reason for loan modification.

Call your lender or loan servicer to ask whether modification is an option for removing a name from your mortgage.

4. Selling
the house

If neither borrower is able to
afford the mortgage on their own, the only option may be to sell the home.

Fortunately, there's a strong
seller's market in many parts of the nation, as housing has been in short
supply for some time. So it may be possible for home sellers to get a great
offer on their property.

However, in areas of the country
where home prices have fallen instead of rising, selling the home could be much
more challenging.

If the mortgage is
underwater, you may have to opt for a "short sale." This is a property sale in
which the net proceeds don't cover all the loans on the property.

If you're unlucky, your
mortgage lender can sue you for the difference between the foreclosure
sale proceeds and the loan balance. This is called a "deficiency," but in many
states, lenders can't come after you for this.

And even if the lender releases you from liability, your credit score and your spouse's will be negatively impacted by a short sale.

A final (risky) option

There is one final option,
but it's risky, and should only be used as a last resort.

You and your ex can agree to
both keep making payments on the mortgage.

This could work if both people decide to continue
living in the house. That way, both parties have an incentive to stay current
with the payments.

Otherwise, experts do not
recommend this approach. If either person stops making payments, the house
could go into foreclosure and the credit scores of both will take a nosedive.

The first four options
require more work, but the odds of a successful outcome are much higher.

Removing a name from the deed

Regardless of which method you use to take your ex's name off the mortgage,  you'll also need to get their name off the deed.

You usually do
this by filing a quitclaim deed, in which your ex-spouse gives up all
rights to the property.

Your ex should sign the
quitclaim deed in front of a notary. One this document is notarized, you file
it with the county. This publicly removes the former partner's name from the
property deed and the mortgage.

If you refinance to remove
the borrower, the title company will remove the spouse's name from the deed for
you.

What are today's refinance
rates?

Mortgage rates are sitting at
historic lows. If you decide to refinance to remove your ex from the mortgage,
you could also be in line to lower your interest rate and payments at the same
time.

Check your rates to see if
refinancing makes sense for you.

Verify your new rate (Dec 12th, 2020)

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Mortgage And Refinance Rates Today, Dec. 11

Posted: 11 Dec 2020 01:57 PM PST

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Today's mortgage and refinance rates 

Average mortgage rates inched down a bit yesterday, returning them to the level of Wednesday's record low.

We may again see lower mortgage rates today. But that depends on politicians continuing to disagree over a pandemic stimulus (or relief) package. If they agree, rates might rise.

Find and lock a low rate (Dec 11th, 2020)

Current mortgage and refinance rates 

Program Mortgage Rate APR* Change
Conventional 30 year fixed 3% 3% Unchanged
Conventional 15 year fixed 2.688% 2.688% Unchanged
Conventional 5 year ARM 3% 2.743% Unchanged
30 year fixed FHA 3% 3.982% +0.88%
15 year fixed FHA 2.125% 3.065% Unchanged
5 year ARM FHA 2.5% 3.226% Unchanged
30 year fixed VA 2.875% 3.053% +0.06%
15 year fixed VA 1.875% 2.193% -0.13%
5 year ARM VA 2.5% 2.406% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Dec 11th, 2020)

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

With mortgage rates so low, you may well choose to lock yours now. After all, you'll be getting a historically amazing deal. And nobody can guarantee they'll keep going down.

However, I think falls continuing to outweigh rises is the most likely scenario for some time to come. So you might get an even better deal if you wait longer to lock.

But, if you choose to take that risk, you should probably pick a good day to lock a couple of weeks before closing. That's because occasional rises are inevitable. And you don't want to find yourself caught in one of those.

See "Are mortgage and refinance rates rising or falling?" (below) for more details. Meanwhile, my personal rate lock recommendations are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

But with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.


Market data affecting today's mortgage rates 

Here's the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys fell to 0.88% from 0.92%. (Good for mortgage rates) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were lower on opening. (Good for mortgage rates.) When investors are buying shares they're often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices were effectively unchanged at $46.79, up from $46.72 a barrel. (Bad for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices fell to $1,840 from $1,852 an ounce. (Neutral for mortgage rates*.) In general, it's better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower
  • CNN Business Fear & Greed index — Inched higher to 76 from 75 out of 100. (Bad for mortgage rates.) "Greedy" investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while "fearful" investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or 40 cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Caveats about markets and rates

Before the pandemic and the Federal Reserve's interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that's no longer the case. The Fed is now a huge player and some days can overwhelm investor sentiment.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. But, with that caveat, so far they're looking OK for mortgage rates today.

Find and lock a low rate (Dec 11th, 2020)

Important notes on today's mortgage rates

Here are some things you need to know:

  1. The Fed's ongoing interventions in the mortgage market (way over $1 trillion) should put continuing downward pressure on these rates. But it can't work miracles all the time. So expect short-term rises as well as falls. And read "For once, the Fed DOES affect mortgage rates. Here's why" if you want to understand this aspect of what's happening
  2. Typically, mortgage rates go up when the economy's doing well and down when it's in trouble. But there are exceptions. Read How mortgage rates are determined and why you should care
  3. Only "top-tier" borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you'll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. Refinance rates are typically close to those for purchases. But some types of refinances from Fannie Mae and Freddie Mac are currently appreciably higher following a regulatory change

So there's a lot going on here. And nobody can claim to know with certainty what's going to happen to mortgage rates in coming hours, days, weeks or months.

Are mortgage and refinance rates rising or falling?

Today

It's hard to find grounds for economic optimism at the moment. So I reckon mortgage rates might again fall today. But that assumes politicians on Capitol Hill don't make real progress toward agreeing on a stimulus package in coming hours.

Of course, yesterday's greenlighting of the Pfizer vaccine by the Food and Drug Administration does provide grounds for optimism. But few experts expect inoculations to have a big effect on a public health level until the second half of 2021. Meanwhile, the pandemic itself continues to strengthen, with some forecasting that the worse is yet to come.

So there's a lot of economic (and personal) pain to be endured before the vaccine makes a real difference. As yesterday's bad unemployment figures showed.

Worse, the pandemic isn't the only source of gloom. A government shutdown is due a week today, absent action by politicians.

And a crippling no-deal Brexit (Britain's withdrawal from its membership of the European Union) is today looking likely. Its economic consequences are likely to ripple across the Atlantic. While its effects will be much less severe here, they'll add to the downward pressure on mortgage rates.

Recently

Over the last few months, the overall trend for mortgage rates has clearly been downward. And a new, weekly all-time low has been set on 14 occasions so far this year according to Freddie Mac. The most recent such record occurred on Dec. 3. And, on Dec. 10, Freddie Mac reported, "Mortgage rates remain at record lows."

Expert mortgage rate forecasts

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

And here are their current rates forecasts for the last quarter of 2020 (Q4/20) and the first three of 2021 (Q1/21, Q2/21 and Q3/21).

But note that Fannie's (released on Nov. 17) and the MBA's (also Nov. 17) are updated monthly. However, Freddie's are now published quarterly. And its latest was released on Oct. 14. So that's beginning to look stale.

The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q4/20 Q1/21 Q2/21 Q3/21
Fannie Mae 2.8% 2.8% 2.8% 2.8%
Freddie Mac 3.0% 3.0% 3.0% 3.0%
MBA 2.9% 3.0% 3.0% 3.2%

So predictions vary considerably. You pays yer money …

And another forecast

On Dec. 2, the National Association of Realtors threw its hat into the forecasting ring. It said:

The forecast anticipates mortgage rates will begin slowly going up toward the last half of 2021, reaching 3.4% by the end of the year.

Find your lowest rate today

Some lenders have been spooked by the pandemic. And they're restricting their offerings to just the most vanilla-flavored mortgages and refinances.

But others remain brave. And you can still probably find the cash-out refinance, investment mortgage or jumbo loan you want. You just have to shop around more widely.

But, of course, you should be comparison shopping widely, no matter what sort of mortgage you want. As federal regulator the Consumer Financial Protection Bureau says:

Shopping around for your mortgage has the potential to lead to real savings. It may not sound like much, but saving even a quarter of a point in interest on your mortgage saves you thousands of dollars over the life of your loan.

Verify your new rate (Dec 11th, 2020)


Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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