In many divorces, the spouses sell the family home and both spouses and their children must move and establish new homes. When one spouse wishes to keep the house, however, both parties must understand what to watch out for to protect themselves down the road.
According to Money.com, a lender considers any person named on the active home loan to be financially liable for the debt regardless of what any other document such as a divorce decree may outline. This means that if one person will keep the house and the other person will leave the house, the two together must figure out how to separate their liability for the mortgage. Failure to do this exposes the person who leaves to pursuit from the bank for any missed or late payments.
U.S. News recommends that the person who will remain in the home either amend the existing loan to remove the name of the other person or get a new loan altogether. Doing this requires the spouse keeping the home to have sufficient income and strong credit to qualify for a solo loan. The amount of equity in the home also plays a role in his or her ability to do this.
If one person successfully obtains a mortgage in his or her name only, he or she should ensure that the former spouse signs a quitclaim deed as well. Failure to do this leaves the door open for that person to benefit from any increased value or gain when the spouse who stayed in the home eventually sells it as the former spouse would retain ownership in the property.