A house is typically the largest asset a married couple acquires. Because of this, it is also one of the most complicated to divide if it comes time to go your separate ways.
Determining what happens with the home will likely be one of the most complex issues of a divorce, which makes having an attorney advise you on the potential options and ramifications extremely important.
One of the most common decisions in a divorce judgment is to simply award the home to one party and subtract the equity from their pool of the marital assets. (For this example, let’s assume the mortgage is not underwater).
While this may seem like a simple solution, it does have its complications: The party not awarded the home will remain on the mortgage and is therefore still liable for the debt unless the loan can be refinanced — something that can be a big question mark in the current market.
The difficulties of refinancing after divorce
Lenders are not a party to the divorce and therefore are not bound by the provisions laid out in the decree, meaning they will continue to hold both parties on the mortgage accountable until your name is off the loan.
While it used to be much easier for people to refinance their homes and remove their ex from the mortgage, since the housing bubble burst, most banks require far more proof of ability to pay. Unless the party awarded the home is easily able to continue making payments on their own, it may be difficult to find a bank to refinance.
If the spouse who was awarded the home falls behind on the mortgage, goes into foreclosure, files for bankruptcy, etc., the spouse who was not awarded the home will also take major hits to their credit rating.
This can be very frustrating for both parties, as even if the spouse awarded the home wants to refinance, that may be impossible as a single-income household.
What you can do to get off the mortgage
The recourse for your ex failing to remove your name from the mortgage can be fairly limited if you have an ambiguously written decree, so it is important that your attorney includes specific provisions in your property settlement agreement to help protect you in the event that your ex does not — or cannot — take you off the loan.
For example, you will want very specific deadlines in your property settlements, such as a requirement for the house to be refinanced within a certain timeframe. This would give you the ability to level contempt charges if the order is not followed.
However, if your ex is simply unable to comply with the order (i.e. can’t find a lender to refinance), it may not be very effective — they cannot get in trouble for failing to follow an order that they do not have the ability to follow.
To give some extra protection, you could also include a condition that if the mortgage is not refinanced within the deadline for any reason, the house should be immediately put on the market. Additionally, you could include provisions that covered specific aspects of a potential sale, such as choice of realtors, getting an appraisal, sale price, choosing an offer, etc.
There are no guarantees
While these stipulations can give you a stronger case to go through court for enforcement of the order, be aware that enforcing even a specific sale provision can be difficult and time-consuming. It may or may not be possible to recoup any expenses incurred or fix any damage to your credit rating.
It is best to have an experienced attorney to guide you through this process, particularly if your spouse is going to keep the home and your name is on the loan. You will want very specific language included in the decree that attempts to protect you from potential future harm if your ex runs into financial difficulties.
Although you cannot have any guaranteed protection (like many aspects of family law), you can take precautionary measures with your decree that might end up saving you a lot of time, additional hassle and your credit.