Joint Mortgage & Divorce

Divorce doesn't change the status of your home loan.

When you and your spouse divorce, you must separate your assets. You are both liable for assets you acquired together, such as a joint mortgage. Although only one of you may keep the home, both of you remain legally responsible for making the mortgage payments each month.

Facts

Even if you and your spouse agree upon who should keep the home you formerly shared, a divorce decree detailing this agreement isn't enough to absolve you both of your obligation to your mortgage lender. If you stop making payments on the mortgage, your mortgage lender can legally pursue either of you for repayment.

Significance

The mortgage will continue to appear on both parties' credit reports after a divorce. If your spouse keeps the home and makes late mortgage payments every now and then, these late payments will damage both of your credit scores--even though you no longer live in the home and never knew the payments were late.

Prevention/Solution

You can absolve your responsibility to the joint mortgage debt by selling the home. Once you close on the sale and the new buyer takes possession of the property, neither you nor your spouse are responsible for the mortgage. Another solution is for the spouse who keeps the home to refinance it. This changes the loan's "joint" status to that of a single-owner property.

References

• Credit.com: Ask John--Credit and Divorce
• MSN Money: Should You Keep the Home in a Divorce?

Resources

• RealtyTimes: Divorce Can Complicate Mortgage Plan
• DivorceSupport.com: Forms, Laws, Information and Resources