In the case of many divorcing couples, marital homes are one of the most valuable assets. As a result, divorcing couples often must decide what to do with the property. There are three general ways to handle a marital home — spouse 1 retains the house, spouse 2 retains the house, or both spouse 1 and spouse 2 sell the house. In most cases in which only one spouse keeps ownership of the home, the other spouse assigns his or her interest in the house to the other spouse through the form of a quitclaim deed. The following will review some of the most common issues that arise when deciding whether to take a spouse’s name off of a property following a divorce settlement.
How a Mortgage can Make a Difference
One issue that often impacts how a couple decides to handle an estate is the existence of a mortgage. In most cases, the mortgage is in the name of both spouses. A mortgage involves a commitment to make payments in the future, which is just one of the reasons why it is important to remove the name of the party who will not end up receiving the marital home. For spouses who will retain ownership of the home, it is also important to make sure that they can continue making payments on the home.
Removing the name of a spouse can often happen through an assumption agreement, which often avoids refinance costs and associated fees. As part of a loan assumption, the divorcing spouses inform the lender that one spouse is taking over the mortgage. As a result of the loan assumption, one spouse agrees to take full responsibility for the mortgage.
Unfortunately, some divorcing spouses fail to account for mortgages in their divorce settlement. Failing to address a mortgage often occurs when a couple does not retain the assistance of a family lawyer.
If the couple has an FHA-backed mortgage, it is also sometimes possible to apply for an FHA streamline refinance, which removes a borrower from the mortgage and reduces the size of monthly payments if current rates are lower. In many cases, it is only possible to get a refinance if a spouse established that they acquired the home and FHA loan more than six months ago and that the spouse made at least six payments on his or her own. The VA streamline refinance requirements are similar to FHA loans.
In a rare number of situations, spouses determine that the best option is for both to keep making payments on the mortgage. This option could work if both individuals decide to continue living in the house. This way, both parties have the motivation to stay up to date with payments. Otherwise, this is often not the best option.
Speak with an Experienced Family Law Attorney
There are many complex and often overlooked elements of the divorce process. If you need the assistance of an experienced family law attorney, consider contacting Vayman & Teitelbaum, P.C. today to schedule a free initial consultation.