There are many difficult financial issues that couples face when they undergo divorce. Dealing with the marital home and a mortgage may be a financially and emotionally challenging family law issue when couples end their marriage.
Married couples typically had a joint mortgage on their family home. Regardless of the divorce decree, both spouses can be liable to creditors and for paying the mortgage if their names remain on the loan.
Creditors may seek payment from you if your name remains on the loan even if your spouse agreed to take over mortgage payments or this obligation was placed in the decree. Additionally, your credit may be ruined, or you may be named in a foreclosure action if your spouse misses mortgage payments or makes no payments at all.
Your current lender may not remove your former spouse from the loan because approval was based on both of your credit scores and income. However, the spouse who keeps the house and remain responsible for the mortgage may refinance the house in their own name. The spouse who refinances agrees to pay this new loan and will remain responsible for payments.
However, most people may not qualify for a mortgage on their own because they have insufficient income. But mortgage rates have dropped to near record lows which may make this option affordable for more spouses.
Spouses who refinance should change the home’s deed. This help assures that the person making the payments is the only one with a legal claim to the home and a deed is stronger proof of ownership. If you and your spouse took title to the house together, you should have the former spouse sign a quit-claim deed to give up their ownership claim.
Selling the home may be the best option if you cannot refinance or independently afford mortgage payments. After the sale, you can divide the proceeds as part of your divorce settlement.
However, selling the home requires you both to find a new place to live. This may be challenging in the current tight housing market. Spouse must agree to a realtor, the sale price and other terms and remain responsible for the home until it is sold. But this may be the best option to provide protection from an unreasonable financial burden.
Keeping the home may also be costly for a spouse who is individually responsible for repairs, taxes, and other expenses in addition to mortgage payments. An attorney can present options on property division and seek a fair and reasonable decree.