Mortgage Options After Divorce

What are your mortgage options after divorce? Try signing a quitclaim deed and refinancing the mortgage so only the homeowner is responsible.

Q: If my spouse said in our divorce mediation that our marital home would be her sole and separate property and that she would be solely responsible for the costs and expenses of the home including the mortgage, why is a court now saying that I must sign a quitclaim deed to her or be in contempt of court?

I have no guarantee that the mortgage will be paid off. What happens if I sign the deed, she dies with the mortgage still active and I’m off the title to the home? She went straight for a name change. Is there trickery here?

A: We don’t know if there is trickery involved, but we frequently see divorce situations where the parties don’t plan things right. The ideal situation is for you to no longer own the property with your former spouse refinancing the home as part of the conveyance of the title to your former spouse.

However, if your former spouse is unable to refinance the home due to financial issues or if the home is underwater (where the debt on the home exceeds the value of the home), the documents you previously agreed to might bind you to convey title to the home even if the mortgage has not been paid off.

While the mediation indicated that your former spouse would be liable for the debt on the home and all expenses from the home, you should have insisted that she refinance the home, pay off the old loan and move on with the home in her name alone with a mortgage only in her name.

Nevertheless, it appears this ideal scenario has eluded you and you are now in a situation where the court will force you to convey title of the home to your ex-spouse. You are correct that having your name on the mortgage to that home still carries the risk that your credit will be hurt if your ex-spouse fails to make each and every payment on time. You would be in that same situation if you were on title, unless you came up with the money to pay the mortgage payment. In either case, you would have to pay money to protect the title to the home and your personal credit.

If she has the money to pay the mortgage but does not pay it, the mediation or divorce documents might give you the right to go after her for her failure to make those payments. While your credit situation would be at risk until she either sells the home or refinances the mortgage, the only consolation you have is the divorce documents that you can send to the credit reporting bureaus indicating that a court ordered you to convey title to your ex-spouse and that your ex-spouse became liable for the debts on the home.

Your credit score might still be affected by the failure to make payments on the loan, but your future creditors will see a viable explanation for late payments on the mortgage, missed payments or other situations that arise and have to do with the home.

If you can find a way to have your ex-spouse refinance the loan, you’d be better off. If you can’t, you might not be much worse off than you are now with a court ordering you to sign the deed over to your ex-spouse.


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