You purchased a home with your spouse and both of you signed for a mortgage. Now you and your spouse are getting a divorce. The focus is often on what to do with the marital home. However, you also need to decide how to handle the mortgage and that can be more complicated than who is getting the former marital home. It is important to know what your options are for the mortgage so that decision can be clearly stated in your final divorce judgment.
Why is this so important?
If the mortgage is in the name of you and your spouse, then the lender considers that loan a shared legal responsibility. So, even if you are not awarded the marital home at divorce, you could still be held liable to pay the mortgage in the event your former spouse fails to do so. Most divorce judgments will state that the spouse being awarded the marital home is solely responsible for paying the mortgage; however, that language doesn’t affect the mortgage lender. So, if the mortgage isn’t paid, the lender will expect both parties of the loan to be responsible for making the payment. Additionally, the late or missed payments will appear on your credit report as that report is not affected by your divorce judgment. The same is true should the home be foreclosed on by the lender. If there is a balance due after the foreclosure, the lender could still sue both you and your former spouse for that debt and that debt could also appear on your credit report.
What is the best decision?
The best decision to protect you and your credit is to have your former spouse refinance the mortgage into his or her sole name. If you believe it will be difficult for your former spouse to qualify for a mortgage, then you should have a backup plan for the house to be sold within a set period of time. While this may not be the result you want to happen for your former spouse or your children, it does result in the joint mortgage debt being resolved and you not having to worry about being sued or your credit score being affected by non-payment. Be sure to stay in communication with your former spouse during the refinance process so you can ensure that the process is completed or if the sale provision of your divorce judgment needs to be enforced.
Although this is not an easy topic to discuss, making the right decision about your mortgage and how it is handled in your divorce judgment is essential to your credit and finances.
Should you need the advice of a divorce attorney or have questions or concerns about your situation, know that we are here to help and discuss those issues with you.