Refinancing a HELOC loan after a divorce. This reader wants to know about refinancing a home equity line of credit to remove an ex-spouse’s name.

Q: I got divorced about four years ago. The deed to the house was, and is, in my name alone, and has been from the time we bought it. 

During our marriage, we took out a home equity loan and my ex-spouse had to co-sign for the loan. Our divorce decree says that I am solely responsible for the mortgage and equity loan payments. It also says that the loan should be refinanced and put solely in my name. 

Great, but what if that’s not possible? I’m still financially responsible for the repayment of the loan and I’m fine with that responsibility. But, my ex-spouse continues to threaten and harass me with legal and contempt charges because I have not removed his name from the loan. He claims that it affects his credit and in his mind I didn’t fulfill all the requirements stated in the divorce decree. Is my ex-spouse correct?

Refinancing a HELOC Loan After a Divorce: If It Was in Our Divorce Decree, Do I Have to Do It?

A: Yes, your ex-spouse is correct. You mentioned in your letter that your divorce decree made you, and only you, responsible for the loan on the home. You also stated that the decree requires you to refinance the loan and take his name off the loan. While you’re candid in acknowledging your obligation to pay the debt, you’re quick to say that you might not be able to refinance or pay off the debt.

Try looking at it from your ex-spouse’s perspective. Having his name on your equity loan means that loan (with whatever payment history it carries) is still listed on his credit history and reflects on his credit score. If you don’t pay on time, then his credit score will take a hit and possibly prevent him from securing his own mortgage. And, just being obligated to repay the full amount of the home equity loan (whatever is left) may mean he won’t qualify for his own home loan, preventing him from buying a new property.

In addition to the financial issues, there’s the emotional tie to being attached to a debt for which he no longer benefits (by living in a house that belongs to you). And, frankly, he’s still attached to you financially, which he may no longer want.

He has every right to demand that you refinance the property.

What Happens if Circumstances Prevent You From Refinancing a HELOC Loan?

On the other side, we realize there could be extenuating circumstances on your end making it hard for you to refinance. Sometimes the person that keeps the home in a divorce doesn’t have sufficient income to refinance the mortgage. In other instances, the spouse has lost his or her job and can’t refinance the debt. And, there are times when the value of the home has declined, making it hard to refinance the loan with the amount of equity remaining. 

That doesn’t mean you can’t try – even if it costs you more because the new loan carries a higher interest rate or extends the term of the loan.

Here’s where you are: Your ex-spouse wants his name off of the loan. You are legally obligated to find a way to do just that (courtesy of your divorce decree). So, either refinance the home equity loan or sell the property. 

More On Refinancing and Sorting Homeownership After a Divorce:

Why You (Probably) Shouldn’t Combine Your Mortgage and HELOC Loans

If I Get Divorced and Then Sell My Home, Can I Still Take the $250,000 Exclusion?

Should I Use a HELOC to Pay Off Credit Card Debt?

Objectivity Helps Divide Assets in a Divorce

Can I Write Off the Interest on a HELOC?

How to Use HELOC After Job Loss

Capital Gains Tax When You Sell Your House After a Divorce

Managing Investment Property Gained in Divorce