Mortgage & Divorce
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.
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Significance
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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
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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.
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Time Frame
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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
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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
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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.
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References
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