Often times, a couple’s largest asset and/or liability is the marital home. In many cases, when a couple contemplates divorce, they agree to sell the home and use the proceeds to pay off their marital debt and divide whatever is left. However sometimes, one party wishes to keep the marital home. This can affect the other party if both the Husband and Wife have signed the mortgage note and are responsible to the mortgage company for the debt. Even if you agree in a settlement that one party shall be solely responsible for the mortgage payment, keep in mind that the mortgage company is not a party to your agreement and the family court does not have the power to force the bank to release either party from liability.
If one party wishes to keep the home and can qualify for a mortgage on their own, they have the option of refinancing the home and removing their ex from the mortgage. They may also use this opportunity to take equity out of the home to pay the ex-spouse’s share. In rare circumstances, the mortgage company may allow one party to assume the mortgage and remove the other party from responsibility. This option is often cheaper but it is rarely approved.
If one party is set on keeping the home but is unable to refinance or assume the mortgage, the parties can agree that the party keeping the home will be solely responsible for all mortgage payments, taxes, insurance, etc. However, the party who is not keeping the home should be sure that should the responsible party make a late payment or miss a payment, the failure of the responsible party would result in the home being listed immediately for sale to prevent further damage to the non-responsible party’s credit. It is also advisable not to sign a Quit Claim Deed until such time as the party assuming responsibility has made arrangements to remove the other parties’ name from the mortgage note.