Real Estate News

Mortgages, Divorce and Separation

Written By: David Reed
Sunday, September 20, 2020

Okay, so lets say a couple meet, start dating and later on down the road they decide its best to tie the knot and live happily ever after. Yet unfortunately, many such unions dont make it all the way. Sometimes the couple decides to maybe take a breather from the partnership and live separately. Just to think things through with a clear head. When this decision is made, many times they decide to separate before nulling the marriage enti>

First, note here there is a legal definition of a separation. A couple who independently decide to take up different residences doesnt let one party off the hook for the mortgage payment. After all, if it took two incomes to qualify for the existing mortgage, a lender will want to know if anything substantial changes. They both signed the note at the outset and they both obligate themselves to pay the mortgage each and every month. Many such situations have one spouse staying in the purchased home while the other moves out and finds another place to live. It may also be that one party declares responsibility for the mortgage payment. So far, this is nothing more than an agreed-to arrangement.nbsp;

But that can present a problem for the individual moving out of the home and looking to buy another. Its quite possible that when trying to qualify for a mortgage to buy another property, that person cant qualify because of the outstanding mortgage payment. Even if the couple decides between themselves who is paying for the mortgage and who is not, the lender is not involved in those discussions. An in-person agreement does not remove one partys responsibility for making the mortgage payment each month.nbsp;

A legal separation might carry a bit more weight. A legal separation spells out in the court documents who is responsible for what. The document is signed by a judge and recorded in public records. If the document states one party is going to be making the payments, that might help offset the debt. But probably not. The lender doesnt really care if the marriage is on the rocks. It cares that its mortgage might be on the rocks. The obligation will typically still remain on both parties credit report, even if the separation agreement spells out who is paying for what.

A divorce works in a similar manner. The divorce decree also spells out who gets what asset and who is responsible for a variety of matters accumulated over time. If one party assumes the mortgage, the lender can remove the monthly debt from one party but in order to completely remove one party from the transaction, not only will the occupying spouse need to refinance the existing mortgage into his or her name, but also to quit claim ownership from one party to the next. Both the mortgage and title need to be taken into consideration. Still, the lender will have a say.

Some lenders want to see the monthly payments be made in a timely manner over a specific period, say for twelve months. Once its been demonstrated the payments have been made, there can be a case for removing the non-occupying person from any future obligation.nbsp;

If a marriage doesnt work out, getting one party off the note legally is a process, not just a marital agreement.

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