Refi Without Your Spouse: How Hard Is It?

Yes, you can refinance to remove your spouse from the mortgage. But only if you qualify for the refinance by yourself — without adding your spouse’s income and credit score into the equation. 

By definition, refinancing replaces your existing mortgage with a new mortgage: The current mortgage gets paid off, and you start fresh with a new loan. Usually, the new loan offers something your old loan doesn’t — like lower payments, less interest, or access to home equity.

Another thing a new loan could offer: A way to get your spouse off the loan. 

Who Needs To Refinance Without a Spouse?

Refinancing without your spouse could solve several problems. It could:

• Allow divorcing couples to divide the home’s value and detangle their financial lives 
• Free a spouse from the mortgage debt so they can buy an investment property or co-sign on an adult child’s mortgage
• Simplify estate planning — to leave the home to your children instead of your spouse, for example

Whatever the reason, there’s typically only one guaranteed way to get a spouse off a mortgage: Paying off the loan. When you don’t have enough cash to pay off the entire balance, you can pay off the loan by rolling the debt into a new loan — aka refinance. 

The Biggest Challenge: Qualifying on One Income

When you purchased or last refinanced the property, chances are you used your and your spouse’s combined income to qualify for the loan. Now, you’ll have to qualify using the remaining spouse’s income alone.

For example, you might qualify for a $3,000-per-month payment with $10,000 in monthly household income. But if you make $6,000 alone, you may not qualify for the same payment.

Plus, if rates increased since you purchased, the payment could rise substantially.

In these cases, you may need to work out an agreement for divorce situations. Work with your lawyer and financial planner for potential solutions to keep your spouse on the loan until such a time as you can refinance alone.

Streamline Refinancing: The Simplest Way To Refinance to Remove a Spouse

Government-insured loan programs — like the FHA, USDA, and VA programs — offer streamline refinances. Streamline refinances update an existing loan without requiring a complete do-over. Some borrowers can close a streamline refinance without a new appraisal or in-depth credit check.

This works only when the borrower already has a government-backed loan: FHA Streamline Refinances replace only FHA mortgages; the VA’s streamline program works only for existing VA borrowers. And so on. As a result, someone with a conventional loan can’t use the FHA Streamline Refinance program.

Since you’re removing a borrower from the file, the lender will probably check your solo income to ensure you can afford the loan. 

Even so, this could be the fastest and most affordable route for spouses with a government-backed mortgage. 

What About Just Asking The Lender To Remove Your Spouse’s Name?

It’s a long shot. But you could ask your lender about a loan assumption or a loan modification to remove your spouse’s name without refinancing.

You can ask, but lenders don’t have to say yes. And if they do consider your request, they may need to see documentation — like a divorce decree or pay stubs showing you can afford the loan by yourself. 

And lenders may also charge a fee — 1 percent of the loan balance, for example — to complete a loan modification or assumption. 

6 Ways to Save Money When You Refinance Without a Spouse

For most conventional loan holders — which is most mortgage borrowers in the nation — there’s no easy shortcut for removing a spouse co-borrower. These homeowners will have to do the legwork of a refinance to eliminate a spouse’s name from the file.

Can you save money while refinancing to remove a spouse? Possibly. This will depend on your unique personal finances, the type of refi you get, and current market conditions.

None of us can change current market conditions. We can only wait for conditions to change. If you can’t wait to refinance, you’ll have to deal with today’s mortgage market. Within this context, though, there are other ways to save money while refinancing:

1. Borrow Only What You Need

Regardless of interest rates, the more you borrow, the more interest you’ll pay each month. Ideally, you’ll borrow less to refinance than you borrowed to buy the house. Let’s say you and your spouse borrowed $300,000 to buy your home 10 years ago. Your principal and interest payment each month has been about $2,000. 

Now the loan balance is down to $235,000. Your principal and interest payment at the same 7 percent interest rate would be about $1,500 — saving $500 a month. Plus, you’d save money on extra fees. In this example, you’d avoid monthly mortgage insurance premiums since your new loan amount comes in at less than 80 percent of your home’s value. 

So why would anyone borrow more in the first place? To get cash back, using a cash-out refinance. This type of loan lets homeowners borrow against their equity — the paid-off value — of the home. If you’re divorcing and need to split the home’s value, you might need a cash-out refi.

2. Improve Your Credit Score First

If you know you’ll need to refinance soon, start working on your credit score now. A thorough credit restoration could take many months or even years. But every point helps. And it’s especially important to avoid lowering your credit score.

Here’s how: Try to pay down, or pay off, credit cards — but leave the paid-off accounts open. Make sure you’re paying existing debts on time, even student loans. Don’t borrow for a car or take out any other loans.

3. Get A Different Co-Borrower If You Need One

Yes, you want your spouse off the loan, but would you consider adding another co-borrower or co-signer? If you’re struggling to get approved for a new mortgage by yourself, adding another responsible borrower — somebody with better income or credit than yours — could put you over the top.

4. Consider A 15-Year Fixed Loan

Before taking the tried-and-true 30-year-fixed route with your new refi, consider whether you could make the higher 15-year payment. If you can afford the payments, you’ll save a ton on interest. 

• A $235,000 30-year mortgage — when paid off on schedule — charges about $330,000 in interest over those three decades. 
• The same $235,000 loan balance paid over 15 years would net about $222,000 in interest. 

That’s a savings of over $100,000. This math doesn’t reflect the lower interest rates lenders can offer on 15-year fixed loans.

5. Consider An ARM

You’ll hear horror stories about adjustable-rate mortgages, or ARMs. Most of these stories come from the big housing market collapse back in 2008 when a lot of people got burned by that era’s poorly regulated ARMs. 

An ARM starts with a fixed rate for a pre-set period which normally ranges from three to seven years. Then, when this initial period ends, the loan’s rate adjusts to match the market at that time. Then, the loan’s rate changes each year until it’s paid off.

Sounds risky? It is, compared to a fixed rate loan, but in the right hands, ARMs can save money.

First, ARMs lock a lower interest rate than a 30-year fixed during that initial fixed-rate period. Second, when the rate adjusts, it could adjust downward — depending on the market at that time. If it does go up, the federal government caps how high it can climb. 

6. Shop Around

In any rate climate — whether rates resemble the historic lows we saw during the pandemic or those incomprehensible double-digits of the 1980s — shopping around with different lenders can create savings.

This is especially true in our current market where online lenders compete with local credit unions and big-name banks. 

Mortgage borrowers worry a lot about rates. Understandably so. But lender fees — like loan origination fees, credit report fees, appraisal fees, and so on — affect the cost of borrowing, too.

Start the conversation about your spouse-less refi

Before accepting any refinance offer from any one lender, get Loan Estimates from at least two other lenders. While you compare rates, compare fees, too.