A client asked me a very important question this week and I thought I should share it with all of you! This happens often in divorces, especially when the Party who has the children wishes to remain in the house.
"I am currently going through a divorce and I would like to keep our home, however I am not on the mortgage and I am in no position to refinance, please tell me my options.
" Well this seems like an easy question, but in fact this is a bit complicated for several reasons.
For sake of argument we will assume that the individual posing the question is a female who has primary custody of her children and who wishes to stay in the house.
The primary factor is: Whose name is on the mortgage? If it's just her name, then no problem - other than the problem of actually paying it! If they are both named on the mortgage or it's JUST in his name, we now have an issue to resolve.
Her husband would be held responsible for making the payments if she ever failed to do so.
And late payments would show up on his credit report.
This would naturally put her husband (or soon to be ex husband) in a tough bind later if any mortgage payments are late or missed.
Sorry, you can't just swap names on the mortgage or take his off.
The financial institution will want to write new paper and will hold the new (or remaining) person on the note up to all of the current standards regarding down payment (or equity), proof of earnings, etc.
However if the ex and she agree that she can handle the responsibility, then they can put it in the divorce decree.
And if she defaults at any time, he has the right to assume the mortgage and put the house on the market for sale.
The down side to this is that he has an arguable right to some access to the equity.
Trust would be a big factor in this case.
This solution would really depend on the relationship and whether she could afford the mortgage payment, make the payment on time and ensure that his credit or his finances would not be affected.
This would be a BIG commitment for a divorcing couple, but it has been done and if kids are involved might ease their stress.