Options if Mortgage Assumption is Rejected?

Hey PF!

I purchased a house w/ my long-term partner (not married) in 2018. We refinanced in 2020 at an interest rate of 2.65% and the mortgage loan is in my partner’s name due to a slightly higher credit score resulting in lower interest rate; both of our names are on everything else.

Recently, my partner and I decided to separate. The ideal scenario would be a mortgage assumption where I have the mortgage loan transferred to my name, I pay my ex her half of the equity, and have my ex’s name removed from all documents. She is fine with this but unfortunately I don’t think the lending company will offer the mortgage assumption since they have little incentive to (low interest rate, conventional loan, etc.)

My ex and I are on very good terms and the plan has always been to split everything with the house 50/50. She is OK having her name on the mortgage loan for a few years to give me a little flexibility with next steps. However, she would eventually like to be removed entirely.

The easiest option would be to sell the house and split everything 50/50. However, I would like to avoid this if possible due to a huge spike in housing prices and interest rates over the last year or so. The other option is for me to re-finance the current loan into my name only, but again I would prefer to avoid this if I can due to the current 7+% interest rates.

I’m hoping to get some ideas or input on creative scenarios my ex and I could draft with a real estate lawyer that would benefit both of us. The one that comes to my mind first is leaving the loan as-is in her name for up to 3 years, with some language that states I will have to re-finance within the next 3 years in the hope that interest rates will drop during that time. I’d also like to include some language to protect my ex, like removing as much of her debt liability as we can, giving her the option to sell the house immediately if I missed a payment…things like that.

Any recommendations or ideas on creative terms that would allow me to take over the loan at a later date with a hopefully lower interest rate than 7%, while keeping my ex protected would be greatly appreciated!