How do I remove my sibling from our mortgage?
My sister and I purchased a house a little over a year ago. I am the borrower, she is the co borrower. We completely re did the house, i.e. basement, kitchen, etc. Now that we own the house, my sister has become a hassle to live with and it is not working. We pay the bills just fine, it's a personality conflict. I want to buy her out, because I have put all the labor into the house and take pride in it, although we split the cost of material. Do I refinance? Does refinancing take her off the mortgage? Will refinancing give me the money to pay her off? My credit score is a 700 - 716. The house when we bought it was $225,000. Not sure what it is worth now, but I have to get away from her...
You need to refinance to remove a debtor from a mortgage.
You mentioned you purchased the home more than a year ago. Therefore, you understand that a mortgage lender wants three things from a potential customer: Steady income, a relatively clean recent credit history, and a debt-to-income ratio of 35% or less. Customers who qualify for a mortgage or a mortgage refinance have all three of these qualities, plus a down-payment in the case of a mortgage.
A refinance is almost exactly the same. You do not mention if you would have qualified for the mortgage yourself without the other borrower's income or credit score. You need to do some homework to see if you qualify. Start with the Bills.com article How Do I Get a Mortgage Refinance Loan? Next, I recommend you download a Uniform Residential Loan Application (Form 1003), complete it, and start your refinance mortgage loan shopping. Then, go to the Bills.com mortgage refinance saving center for no-cost, pre-screened quotes from mortgage refinance lenders.
Credit Report
Next, go to AnnualCreditReport.com to get a no-cost, no-obligation copy of your credit report from each of the three major consumer credit reporting companies (commonly called "credit bureaus"). Review your report and dispute any inaccurate listings.
To find out more how your credit score is calculated I recommend you read an article I wrote explaining FICO Score Calculation. This should give you a much clearer understanding of how credit scores work.
A 700+ credit score is a strong score, and I do not see that your credit score alone indicates a problem with your credit history.
Debt-to-Income Ratio
Finally, lenders calculate and analyze your debt-to-income ratio to determine the size of the mortgage or mortgage refinance you can afford. See DTI: Debt-to-Income Ratio Information to learn how to calculate your debt-to-income ratio.
Appraised value
An appraisal is necessary for a mortgage or a refinance to determine the market value of the property.
This is written in early 2010. The last three years have been brutal for housing values across the US. Some areas have seen market values fall 50%, where other areas have dipped 15%. If the value of the properties in your area have held steady the last 12 months, you may be in a situation where the appraised value on your property may be the same as it was when you purchased it.
You mentioned you added upgrades and improvements, which may increase the estimated market value of your property. On the other hand, if the market values in your area are still sliding, then the value of your property may be less despite your improvements. My guess is that you already have an idea which way an appraisal will fall in your situation.
Analysis
You should be able to qualify for a mortgage refinance loan if you have a steady, adequate income, your DTI is 35% or less, and the market values in your neighborhood have held steady the last 12 months. As mentioned, download a Form 1003 and start shopping.
I hope this information helps you Find. Learn & Save.
Best,
Bill