Mortgage & Divorce

In a divorce, the marriage is not the only asset that must be separated.

In the event of a divorce, if both spouses are borrowers listed on a mortgage debt, both are liable for the mortgage, even if one spouse is keeping the residence. To remove the other spouse, one spouse must refinance the mortgage.

Significance

In the event of a divorce, if one spouse is keeping the residence, unless a full refinance takes place, the other spouse is still liable for the debt. This can cause financial hardship or negatively affect the credit report for the non-occupant spouse if the other does not pay the mortgage debt on time.

Effects

Aside from a negative impact on a credit rating, if the non-occupant spouse tries to purchase another residence while still liable for the first mortgage, the original debt will count against him in the application process.

Time Frame

In most divorce proceedings, the spouse who receives the house in the divorce is required to refinance within a set period of time, usually six months, to remove the other spouse from the debt.

Considerations

The financial strength of the spouse left with the house should be considered when dividing assets. If the occupant spouse is not able to refinance, the non-occupant spouse is still liable for the debt.

Misconceptions

Until the refinance is final and the deed on the home has legally been changed, the non-occupant spouse is still liable for the mortgage, regardless of which spouse pays the monthly bill.

References

• WomansDivorce.com: Divorce and Mortgage Questions
• CreditInfoCenter.com: How Do I Protect My Credit When I Get Divorced?