Removing a borrower from a VA loan isn’t a procedure most think about when applying for a VA mortgage, but it is a contingency some will face for a variety of reasons.
In some cases, multiple borrowers apply for a VA mortgage loan together, but one borrower later decides that arrangement does not work for them any longer. In other cases, divorce or other circumstances may affect the arrangement.
How do VA borrowers get their names taken off a VA mortgage loan? The rules for this can be found in the VA Lender’s Handbook, VA Pamphlet 26-7, and it’s important to point out that in addition to the rules of the VA loan program, state law, lender requirements, and other factors may also apply.
Disclaimer: What follows is not legal advice, and should not be taken as such. If you need legal assistance when it comes to removing a borrower from a VA loan or adding/removing someone from the legal deed or title to the property, you should retain experienced legal counsel specializing in real estate or lending law in your state.
How To Remove Someone From A VA Home Loan
In general, the way to remove someone from a VA mortgage is to have the loan refinanced into the name of the remaining borrower(s) alone.
The simplest way to achieve this may be to apply for a VA Interest Rate Reduction Refinance Loan (VA IRRRL) which generally must result in some kind of benefit to the borrower in the form of a lower interest rate, lower payments, or the ability to move out of an adjustable rate mortgage into a fixed rate VA loan.
There are restrictions.
VA Interest Rate Reduction Refinance Loans are not open to a non-military spouse, for example, applying alone to get the veteran borrower off of the mortgage. VA loans cannot be issued to non-military borrowers on the original mortgage including the spouse.
Certain exceptions are made for qualifying surviving spouses of service members who have died as a result of military service, but in general, the non-VA loan eligible borrowers cannot apply for VA mortgages including refinance loans.
There may also be restrictions imposed by state law (see below).
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Other VA Refinancing Loans
In general, for VA refinance loans (cash-out, no cash-out, etc.) the same parties obligated on the original loan must be on the new loan, but you may be able to refinance a VA mortgage in a single veteran borrower’s name only (provided that borrower was named in the original transaction).
In any case, VA refinance loans require occupancy and the new loan will require at least one borrower or her spouse or qualifying dependent children to use the home as the primary residence.
VA Loans, Co-Borrowing, And State Law
A legally married couple has VA loan options that a veteran and non-veteran who are not married don’t. A legally married couple can apply for the VA loan together without consideration for the non-military spouse’s status as such.
An unmarried veteran and non-veteran borrower applying together for the VA loan will learn that the VA only guarantees the veteran’s portion of the mortgage.
Why are these issues relevant to adding or removing another borrower from the loan? Because a veteran and spouse will have different considerations in such cases than two veteran borrowers or a veteran and non-veteran borrower, etc.
When a legally married couple applies for the loan, state law may affect the transaction where community property laws exist. Community property laws are state requirements that affect the legal standing of/responsibility for debt between the couple, and how debt obtained in a legal marriage is to be divided should the couple get a divorce.
Community property laws may affect how you can remove a spouse from a VA mortgage depending on the state the home is in; it pays to read up on community property law before moving forward with a procedure to remove a borrower in such circumstances.
VA loan rules do not override state community property law, and the Department of Veterans Affairs does not keep track of such laws or how they may change.
Community property laws generally do not affect transactions between non-married VA co-borrowers, but your experience may vary depending on a variety of factors including whether or not the applicants are considered a “common law” couple (again, depending on the state).
Other VA Refinancing Loans
In general, for VA refinance loans (cash-out, no cash-out, etc.) the same parties obligated on the original loan must be on the new loan, but you may be able to refinance a VA mortgage in a single veteran borrower’s name only (provided that borrower was named in the original transaction).
In any case, VA refinance loans require occupancy and the new loan will require at least one borrower or her spouse or qualifying dependent children to use the home as the primary residence.
VA Loan Assumptions-An Option To Refinancing
In cases where a veteran wants to get out of a VA mortgage loan but does not have a co-borrower, the VA loan assumption is an alternative.
A VA loan assumption is not the same procedure as a refinance loan, but it does allow a non-military person to assume responsibility for the existing VA mortgage, and release the original borrower from having to make monthly mortgage payments.
The person assuming the loan must financially qualify and agree to relieve the Department of Veterans Affairs from any responsibility for the mortgage.
A loan assumption is not the same as a refinance loan-the assuming borrower takes over the original mortgage. A release of liability issues for the original borrower may depend on a variety of factors so it is crucial to ask the lender about it. Lender standards, state law, and other factors will affect your transaction where applicable.
VA loan assumptions may also be possible when a legally married couple are divorcing and the non-military spouse wants to take over the loan, or when a co-borrower wants to get out of the loan but the other borrower(s) do not.
VA Loan Rules Versus State Law For Deeds
All of the information you have read on this page about VA loans, adding or dropping borrowers and refinancing applies strictly to VA loan rules for the loan transaction itself.
If you have questions about deeds, you will need to consult the local authority in your state as VA loan rules do not address deed issues (except where they may directly pertain to VA loan requirements) nor does the Department of Veterans Affairs keep copies of state deed law or related data.
VA Loan Rules For Loan Assumptions, Refinance Loans, And Who May Borrow
VA loan rules do not address other regulations, requirements, or ordinances that relate to the real estate transaction, matters of the deed, legal requirements for conveyance, obligation, or ownership of the property as governed by state/federal law.
VA loan rules are limited to instructions to the various parties to the loan for procedural matters and regulations as they pertain to the VA and VA regulations.
Additional lender requirements and other standards may apply.
