In our last post, we began talking about the issue of keeping the family home in divorce, an issue which can be somewhat contentious in divorce. As we noted, couples are not always able from a financial standpoint to keep their home, especially when a refinance is not possible.
Where refinancing is possible, it is important to check title transfer documents to ensure everything is done correctly. It is also important for couples who have an agreement for one party to refinance the home to make sure in advance the refinance will go through. This can be done by asking the lender to run a credit check. If problems are likely to arise, changes in the agreement can be negotiated.
Divorcing couples who cannot refinance for whatever reason should be particularly cautious about coming up with a private arrangement in which one party agrees to maintain sole financial responsibility for the home without refinancing the mortgage loan. These types of arrangements only work as long as the party keeping the home is both willing and able to abide by the agreement. If their mind or circumstances change, the other party can be pursued for the remaining debt by the lender and their credit score can be negatively impacted.
In cases where both parties are able and want to keep the home and cannot agree as to who will take responsibility for it, a court will have to make that decision for them based on the circumstances of the case. Of course, it is important to work with an experienced attorney to ensure one's interests are represented.
Source: Wall Street Journal, "In a Divorce, How One Spouse Can Keep the House," Nov. 5, 2014.