Why is it important to address refinancing a mortgage in a divorce?
The most valuable asset most couples own is their home. It is by far a couple’s largest financial liability.
A home in a divorce is either:
* sold with the parties each receiving some portion of the profit after closing costs and realtor fees.
* awarded to one of the former spouses and that person is then solely responsible for paying the mortgage, property taxes, utilities and maintenance. The person getting the home may have to pay the former spouse some money for his or her interest in this joint asset.
Once the divorcing couple determines who is going to keep the house, they must take into consideration whose name is on the mortgage because a divorce does not remove anyone’s name off of that mortgage. There are three ways a person’s name is removed from a mortgage:
* the house is sold and the mortgage is hopefully paid in full.
* the mortgage is refinanced so the person keeping the house is the one and only person responsible for this debt.
* the mortgage company agrees to take the ex-spouse off the mortgage and only hold the person keeping the home responsible for paying the mortgage. This option is rarely allowed, however. Some FHA and military loans allow this option so calling the mortgage company to see if this is an option is key.
Unless the home is sold and the mortgage is paid in full, the mortgage is refinanced in the name of the ex-spouse keeping the home or the mortgage company allows the spouse keeping the home to assume a mortgage, the ex-spouse stepping away from the home could remain on the mortgage until it is paid in full, whenever that happens. So, financially planning on how to divide the home and its debt is a major issue that can have lasting effects and should be done correctly.
Contact experienced family law attorney Jessica L. Sterle at (218) 722-2655 to schedule a consultation to discuss divorce and how assets and debts are divided in the process.