In divorce, it is not always an easy task to separate from a spouse in every way. This is particularly the case when there are children involved and both parents want to continue to be involved in their lives. It can also be the case when one or the other party wants to keep the family home but is unable to have the other spouse removed from the mortgage.
Typically, the party who is keeping the home after divorce will seek to have the mortgage loan refinanced in order to remove his or her ex from the loan. This is not always possible, though, particularly for large mortgages. Part of the problem with refinancing lies in the inability of many divorced individuals to demonstrate an acceptable debt-to-income ratio. Weak credit history can also be a barrier to refinancing for some divorcees.
When refinancing isn't possible, couples either have to sell their home or agree that the one taking possession will be solely responsible for mortgage payments. Making such an agreement is risky, though, since the lender will not respect the agreement. Also, if payments are missed, both parties' credit scores can be impacted.
For couples who do plan on refinancing and who believe they will be able to do so, it is recommended that a couple precautions be taken. Firstly, it is smart to check with the lender beforehand to determine whether a refinance is possible. If not, steps can be taken to change the plan or the circumstances barring refinancing, or another plan can be devised. Second, spouses should be sure to have a quitclaim deed property executed to ensure there are no delays in refinancing and that the spouse taking ownership of the home is protected by the official change in ownership. Of course, working through such issues in divorce can be easier when working with an experienced family law attorney as well as other appropriate professionals.
Source: The Wall Street Journal, "In a Divorce, How One Spouse Can Keep the House," Anya Martin, Nov. 5, 2014.