How To Get Out Of A Mortgage

There are ways to legally get out of your mortgage if you encounter significant life changes or financial difficulties. While stopping mortgage payments may seem tempting, doing so without a plan can lead to serious repercussions, such as foreclosure and damage to your credit score.

Take a proactive and informed approach to explore alternatives that may help you make the best of a challenging situation without sacrificing your long-term financial well-being.

Can You Get Out Of A Mortgage?

It is possible to get out of a mortgage if you find yourself under financial pressure or growing duress for any number of reasons, such as those listed below.

Inability To Make Monthly Payments

It’s not uncommon to be temporarily unable to make ends meet, especially in challenging and uncertain economic times. In addition, other unforeseen events such as unexpected job loss, mounting medical bills and growing credit card debt can also make it hard to keep up with monthly mortgage payments.

Sudden Relocation

Work matters or family emergencies may prompt homeowners to quickly pick up and move, no matter how long they’d initially planned to stay in a residence.

Separation Or Divorce

Co-borrowers who separate or divorce may find themselves struggling to manage ownership, mortgages and other expenses at a time when finances may be unpredictable and uncertain.

Changing Property Values

If you owe more on your mortgage than the market value of the property and have found a similar home that costs significantly less, you may wish to get out of your mortgage.

How To Get Out Of Your Mortgage Legally

There are many ways to get out of your mortgage legally. What’s more, getting out of a home mortgage may not be as time-consuming or difficult as you may think. For example, you might be able to get out of your mortgage using one of the following options.

Talk To Your Lender

Homeowners who find themselves under financial duress are advised to speak with their lender as soon as possible. Your financial provider can often offer ideas, suggestions and support to help you through times of financial hardship.

Sell Your Home

Listing your home for sale and finding a buyer for it can help provide needed funds with which to pay off the remainder of your home mortgage loan. If you have enough home equity to pay off your remaining mortgage balance this is the simplest solution to getting out of your mortgage.

Request A Deed In Lieu Of Foreclosure

A deed in lieu of foreclosure arrangement can help stave off more serious financial hardship. Under its terms, you’ll give your mortgage lender the deed to your home, releasing you from your mortgage responsibilities and avoiding having a foreclosure appear on your credit report. While a deed in lieu of foreclosure also shows up on your credit report, lenders don’t consider it as serious as foreclosure.

Have A Short Sale

Short sales happen in real estate when homeowners facing financial hardship agree with their lender to sell a home for less than they owe on the mortgage. If you initiate a short sale, your lender receives all proceeds of the sale. Your lender will then either forgive the remaining balance or arrange for you to make later repayment through a deficiency judgment.

Let Your House Go Into Foreclosure

If you’re unable to make your mortgage payments, your lender can pursue a legal process known as foreclosure. If your lender forecloses on your home, they take ownership and can sell the property. Be warned – foreclosure can severely damage your credit history.

Strategic Default

A strategic default, also known as a voluntary default or simply walking away, occurs when a borrower opts to stop paying their mortgage. Typically, this happens when the property’s market value falls way below the amount owed on the mortgage.

Although it can free you from your mortgage obligations, it is only to be used as a last resort. Those who use this strategy can expect to take a serious hit to their credit rating.

How To Get Out Of A Joint Mortgage

Looking to remove someone else’s name from a joint mortgage? There are several ways you can go about facilitating this.

Refinance The Loan

Mortgage refinancing refers to the process of obtaining a new home loan. At the time you refinance, your new mortgage loan will repay your old mortgage loan, leaving you with a single loan and monthly payment. By refinancing your home loan, you can get out of a joint mortgage or remove another party’s name from the loan.

How To Get Out Of A Reverse Mortgage

Reverse mortgages are typically used by individuals of retirement age who need added income to better cover their expenses or who wish to lower monthly mortgage payments. A reverse mortgage lets you receive monthly payments based on your home’s value. Please note Rocket Mortgage^® does not offer this option at this time.

However, it’s not uncommon for homeowners to also desire to get out of a reverse mortgage because they cannot physically live in the home anymore, wish to spare their heirs from having to pay back a loan or a variety of additional reasons.

1. Use your right of rescission. The right of rescission, as defined and provided for in the Federal Truth in Lending Act, gives you the ability to cancel and back out of a home equity loan or line of credit within the first 3 days of closing upon it.
2. Pay off the reverse mortgage. Homeowners also have the option to pay off a reverse mortgage with personal savings, or by taking out a conventional loan.
3. Refinance to a traditional loan. As with other mortgage types, you can also refinance your reverse mortgage into a traditional loan if you prefer.

Alternatives To Getting Out Of A Mortgage

If you're facing financial hardship and struggling to make your mortgage payments, there are several alternatives worth exploring before considering more drastic measures.

• A loan modification is a change to the original terms of your mortgage loan which alters the conditions of your loan agreement. This may include adjusting to a more favorable interest rate. Reach out to your lender if you wish to obtain one.
• Renting out your home to prospective tenants can also produce additional income in times of need and provide a handy way to help you make mortgage payments.
• A cash-out refinance creates the option for you to borrow more than you owe on your mortgage and pocket the difference (which represents the equity that you have built in your home).

Pros And Cons Of Getting Out Of A Mortgage

Getting out of a mortgage comes with advantages and disadvantages attached.

Pros

• This allows you to remove yourself from a frustrating financial situation.
• Separated or divorced homeowners can get their names off a mortgage.
• In many cases, you’re free to get a new home and mortgage as a home buyer.
• Some options alleviate the stress and burden of significant outstanding debts.

Cons

• Defaulting or going into foreclosure will hurt your credit score.
• You’ll have fewer options if you can’t sell your home.
• You may have trouble getting another mortgage in the future.
• Foreclosures and defaults will be reflected in your credit history and rating.

The Bottom Line

Having to get out of a mortgage isn’t a preferred option for many homeowners, but is a relatively common one nonetheless. Luckily, there are many solutions for legally getting out of a mortgage if you find yourself in unexpected financial duress.

Looking for help with a solution? Start an application for mortgage refinancing today through Rocket Mortgage^®.