Taking name off the deed, keeping it on the mortgage - ruin my credit?

Question

Hey everybody, I'm in a situation I never saw coming, and hoping for a little advice. I bought a house with my ex, and after a few years, we split up (on good terms). She wants to buy me out of my share of the house, which I fully support. The thing is, our mortgage is at about 2.8%, and I don't have to tell you how much higher it would be if we refinanced to get the mortgage in her name alone. So:

Am I right in guessing that if I sell her my stake in the house and take my name off the deed, but I leave the mortgage alone (with both our names on it), my credit score would plummet?

Thanks!

Chris Seveney · Answer

your credit score would not plummet, but you are still responsible for the debt so it will still show up on credit and it will impact your ability to get credit.

The only way for her to truly buy you out is to refinance and take your name off of it.

My recommendation would be to sell the property, as you may be on good terms now but that does not mean you will be on good terms in the future.

John Clark · Answer

See a lawyer, because your agreement with her leaves you vulnerable above and beyond the hit to your credit if she misses payments. These include (but are not limited to);

a. a drop dead date for her to refinance and take you off the mortgage (5 years, whatever);

b. trigger events for her to refinance regardless of date (birth of child, remarriage, failure to maintain the house physically, cease using house as primary residence, failure to pay insurance or property taxes, no "subject to" sales  and etc., etc).

and no doubt a host of other things.

Then there's your remedy if she fails to keep her end of the bargain, including who gets appreciation, right to possess or maintain, etc.

Your credit score is far down the list of concerns

Tanner Lewis · Answer

Hey Nicholas - I think you can just assume the loan if it is conventional. But if you change title, but not the loan, you should watch out for a due on sale clause

Basit Siddiqi · Answer

If you are on the mortgage, 100% of the loan payment will count towards your DTI ratio making it hard for you to get financing in the future.

Steve K. · Answer

Just echoing others here to encourage you to seek legal consultation. Your credit score won’t automatically plummet in this scenario, but there is risk to your credit if any payments are missed. Your debt to income ratio will be negatively impacted affecting your buying power/ ability to get new loans. What I’d be more concerned about is all the “what ifs” that an attorney might help you anticipate. What if she dies, claims bankruptcy, misses payments, gets a new partner who you don’t get along with and they intentionally screw you over in some way, etc. You lose control of the property by taking your name off the deed, but will still be responsible for the payments because you’re still on the mortgage. I’m guessing an attorney would advise you to make a clean break by simply selling the property or having her buy you out and refinance the loan to get you off of it, but I’m not an attorney so I’d recommend talking to one about it.

Manny Vasquez · Answer

If you take your name off of the deed, it will not affect your credit score.  However, most everyone here will advise you to NOT take your name off the deed if you will still be on the mortgage.

Regarding purchasing another house down the road....the "new" bank will want to know what is going on with a mortgage showing up on your credit report.  It will definitely be a hit against your DTI numbers.  One work around this problem would be to request your Ex to provide you with a payment history of the mortgage payments  she has made (i.e. cancelled checks, bank statements showing the payments have been sent, etc.).  This usually does the trick.  However, it will ultimately be up to the bank (and the underwriter) to determine if they allow this.  If they don't then try to find a bank that will allow this work around.

Matthew Paul · Answer

Basically if you do that , she owns the house and you are responsible to pay for it .

Now 5 years from now , you get married and want to buy a house , you will have a hard time qualifying , because you still have a mortgage in your name .

Dont do it .

Mitch Messer · Answer

@Nicholas Henry Provided your ex continues to make on-time payments on your mortgage, there's no reason your credit score should move one bit.You're selling it to her subject to the existing mortgage. It's definitely a "thing!"

Taking name off the deed, keeping it on the mortgage - ruin my credit?

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