the arbor edge

Divorce is a rough time for anyone; causing squabbles over the tiniest of details.  The home and mortgage, however, is not a tiny detail.  It is likely the largest debt in play.  If both spouse’s names are on a mortgage how do you remove the other spouse’s liability? 

It is a common misunderstanding that if the marital home is awarded to one spouse in a divorce, the other spouse is free and clear of that debt.  Not true at all.  Even if you remove a name from title of the home, if that person is still on the mortgage note, they are still responsible for that debt.  This means that the mortgage will remain on both credit reports making it near impossible for the other spouse to obtain a new mortgage.  Or, even worse, if one spouse stops paying the mortgage, it will damage BOTH credit ratings.

There are 2 main ways to absolve someone of their mortgage responsibilities – Sell or Refinance.  If selling isn’t an option, it’s time to look at refinancing.  The spouse retaining the home does have to credit qualify for a loan, and they have to be able to handle the payments on only their income.  The home will have to be appraised and any equity can be used to “buy out” the other spouse per the divorce decree.