Legal disclosure: I am not an attorney, nor do I play one on TV. Please do seek legal council if you are considering a divorce and before DIY legal documents relating to your marriage or mortgage or real estate. 🙂
I recently met with newlyweds who wanted to start developing a plan to purchase a home together. The bride was previously married and terminated that union with a do-it-yourself divorce decree and saved money (or thought she did) by not utilizing an attorney. When they did this several years ago, it made sense to them. They were amicable and agreed to how they would divvy up their debts and what assets they had acquired at that time. He would keep the house and the mortgage. She would sign and record a quit claim deed. This is where the trouble begins.
A quit claim deed does not remove borrowers from the mortgage and a divorce decree does not remove one’s liability from a mortgage (or other joint debts).
In my clients case, she is now liable for a mortgage on a property she has no interest in except for the debt.
You would think a borrower could contact the lender and ask to have the mortgage modified by removing one of the ex’s assuming the person retaining the property qualifies for the debt on their own. This is just not the case.
My client’s ex-husband decided to no longer pay the mortgage. Foreclosure proceedings are scheduled to begin next month. Her credit score has plummeted and the mortgage company couldn’t care less about her situation. She is being sucked into the foreclosure on a property she has not lived in for years. And she will not be able to qualify for a mortgage at this time. It is emotionally and financially devastating.
Unfortunately, the only way to safely remove someone’s responsibility to the mortgage is by paying it off. This can by accomplished by:
- Cash (paying off the mortgage)
- Selling the property
- Refinancing the mortgage
In addition, an ex’s debts from a divorce are factored into the debt-to-income ratio unless the ex has made the payments on time for the past 12 months and the debts are clearly listed in the divorce decree. If the ex has been late once on an account over the past 12 months, that monthly payment is factored into the debt to income ratios of other ex trying to qualify for a new home. This isn’t limited to mortgages; it can be joint credit cards, car payments…any joint debts.
If you own mortgaged property with someone (married or not) and are considering dissolving your relationship, please do not “do it yourself