Divorced homeowners stuggling with the task of removing a former spouse’s name from the mortgage after buying out his or her equity stake in the marital house may think refinancing is the only choice.

There is another, little-known option that could possibly help you avoid refinancing and its costs, which generally run 3 to 6 percent of the outstanding loan principal. You simply ask your lender to remove the former spouse’s name, leaving the loan note in your name only.

Not all lenders or mortgage servicers offer this option, known as release of liability. The lenders and servicers that do will most likely run a separate credit check on you — requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal. If you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.

Most divorce settlements stipulate one of two outcomes for marital property. Either the house must be sold, or the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage — either through refinancing or a release of liability — typically within a year.

Under the second option, the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage.

Having the name removed protects the credit of both parties, actually. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, your former spouse’s credit could be hurt.

Lenders or servicers typically charge $300 to $1,000 to execute a release of liability and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days.

Qualified borrowers not accorded the release they are asking for should consider telling their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage — at another lender. In such cases, the servicer might agree to do it.

Have you, or someone you know, been through this situation during or following a divorce? We’d love to hear the outcome. Were you or the other known party successful in getting the spouse removed from the mortgage? Use the comment link below to send us your comments…