Financial Facts: How divorce affects your mortgage
April 12, 2013
I once heard something that has stuck with me for many years, that love is grand, but divorce is at least one hundred grand. I have also heard a client, jokingly say, that if that was all it would have cost him he would have been divorced years ago. So sometimes something as serious as divorce, it is best to laugh at it.
On a serious note, divorce can be a one of the most troubling events to happen in one’s life. Who gets what, who pays who what, and it is all your fault. Sleepless nights and the thought of ending a relationship can be quite unnerving.
As a mortgage banker, I look at divorce as an end to a business relationship, and it should be handled as such. If you own a home and have a mortgage on the home it is necessary to get the divorce decree to detail who is responsible for the payment. If you have credit cards that are in joint name, you need these listed in the divorce decree to document who is responsible for the debt. If you own vehicles, these need to be listed in the divorce decree to show ownership also.
Probably the largest investment a couple will ever make is their home. When a divorce occurs, the home is one item that always is an item of discussion. No matter who gets the home there is generally a mortgage that then needs attention. If the home is in joint ownership, the divorce settlement will detail who gets to stay and who gets the mortgage. The problem can now occur where the one who gets the home also gets the mortgage. The divorce settlement may state that the one who gets the home has to pay the mortgage and may have a period of time in which to refinance the mortgage to remove the past partner’s name from the title. Just because the divorce occurs, the courts cannot dictate to the mortgage lender to remove one name from their documents. There are only three ways to get one’s name off a mortgage: One, refinance the mortgage into other names. Two, pay off the mortgage with cash. Or three, die, and prove it with a death certificate.
One thing to keep in mind, especially if you are the one in the divorce that does not keep the home, if the one responsible for paying the mortgage makes a late mortgage payment prior to getting your name off the note, both of you will see a hit to your credit scores.
This may seem inconsequential, but if you plan to invest in a new home a late payment on your old home may stop your purchase dead in its tracks.
The same can be true for credit cards. If you are the one in the divorce that is no longer responsible for the debt, be sure to get your name off that account as soon as possible. If it is an installment loan, such as a car loan, I suggest that you get the court to require the other side to refinance the loan. If the other side cannot afford to keep the asset, maybe you should ask that the asset be sold. This is an effort to save your credit history.
Excluding the death of a family member, a divorce can be very traumatic. Be knowledgeable of how you can make your financial future a little brighter. And look at the divorce as a business deal that is ending, so do it business like.
For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at firstname.lastname@example.org. Bob is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.