Maybe you and your spouse came to mutually agree that it’s best to part ways, and decided that your spouse is to keep the house and you are to not deal with the mortgages any more. Unfortunately, it’s not that simple. Even when a couple agrees that one person is to be no longer responsible for the mortgage, the lender doesn’t have to see it that way.
Even divorce courts can’t change the terms of your loan.
When you and your spouse got that loan for that house, each of you agreed with the lender to be “jointly and severally” liable for the loan. It means the lender can come after both or either of you in the event of a default, and late payments will hurt both of your credit scores. A divorce or an agreement between you and your spouse does not change the agreement between you and the lender. The only legal way to become no longer responsible for the mortgage is to actually take the name off through the lender.
There are three scenarios where you are no longer responsible for the mortgage.
1. Your spouse refinancing without your name
This requires the spouse to have sufficient equity, credit, and income by himself/herself.
However, many lenders will want proof that the spouse can make mortgage payments by himself/herself. This will require filling out applications and sending paperwork to document the assets, income, debts and credit history. If applicable, FHA or VA streamline refinancing is also an option.
2. Your spouse assuming the loan
Under the first scenario, your spouse was refinancing the loan in his/her name, with new terms. This loan assumption scenario is where your spouse takes over the current loan in his/her name, with all terms remaining the same.
While this sounds simple in theory, many lenders won’t agree to a loan assumption. And lenders that do agree may demand evidence that the remaining borrower can afford the payments, much like refinancing.
3. Selling the house
If refinancing or loan assumption does not work, selling the house is the only scenario where you are legally and officially no longer responsible for the mortgage. This is because your obligation as borrower is based on your agreement with the lender, and you are off the hook only if the lender agrees or is paid off.
JCKLAW recognizes that divorce is a big life decision and an important life event. As big and important as it is, it is often daunting and stressful just on an emotional aspect alone. We can help you with the legal aspect of the divorce, so that you have one less thing to worry about.
If you are thinking about divorce and want to find out more about your options and legal rights, contact our office at 718-539-1100 or email us at info@jckimlaw.com. We are here to help.