Married couples that own a home and make the choice to get divorced will have to figure out what to do with their home during or after their divorce. In some cases, one spouse wants to stay in the home, often to maintain some stability for the children. If this happens, it will be very important for the other person to protect themselves financially.
According to Bankrate, divorcing spouses should never let their divorce decree be the only means of identifying financial responsibility for a mortgage. Even with this court order, a bank may consider both spouses to be responsible for the mortgage should they allow the original joint mortgage to remain intact. For a bank, it is the name on a debt that matters, not the terms of a divorce decree.
The way to stay protected against collections efforts or negative remarks on a credit report due to a former spouse’s failure to make a mortgage payment is to require that person to refinance the home loan into a new loan in their name alone. This can be done in conjunction with signing a quit claim deed to also assign full legal ownership of the property to that person.
The Mortgage Reports explains, however, that obtaining a new solo mortgage on the heels of a divorce may not always be possible as a person’s credit generally drops at this time, as does their income. The amount of equity that the couple had built up in the home since it was purchased may end up being a critical factor in a person’s ability to keep their home after a divorce.