By: Jessica A. Bryant
After a divorce decree is entered, there may still be steps that need to be taken to wrap up property division issues (for example completion of forms and orders to divide a retirement account and/or steps to divide the ownership and responsibility for real estate). When a home was jointly titled and jointly mortgaged during the marriage, and one person is keeping the property following the divorce, there are steps to take to finalize the sole ownership of that property item. One such step is changing over the title, which is as straightforward as signing a quitclaim deed and recording it with the clerk and recorder’s office for the county in which the property is located. The more complex step is getting the person that did not retain ownership off of the mortgage. This step is necessary for the protection of both parties. For the party retaining the property, it ensures they have complete ownership of the property, as well as complete responsibility for all liabilities, and can be solely responsible for future decisions for the property. For the person not retaining the property, it is critical to ensure you are removed from the mortgage. If the other person does not pay the mortgage, and you are still on the mortgage, the bank can come after you for recovery of the debt, regardless of what your divorce orders say. Therefore, if the other person will not be able to remove you from the mortgage for the property, it may be important to consider alternative methods of dividing the property, prior to finalizing the divorce, to ensure you are protected from creditors.
It is not uncommon for the individual that is the primary parent of the children to want to retain the house as their property, to ensure consistency for the children. However, depending on the person’s income, they may not qualify to refinance the mortgage into their sole name, which may cause issues for the other parent in terms of protection for credit, ability to qualify to purchase another home, etc. Therefore, before finalizing a divorce case, it is important to consider all aspects of the property division, including whether the party receiving any real estate as their sole property will be able to refinance any mortgages into their sole name.
One aspect that can be considered in determining a person’s qualifications or ability to refinance is whether there maintenance (alimony) orders in the case. Alimony payments may be considered as “income” for mortgage qualification purposes. However, alimony payments will only be considered for a refinance if they are court ordered payments, have been received consistently for six months, and will be received for at least three years. These time frames are important because steps you take while your divorce case is pending could actually affect whether a person is able to refinance the home. For example compare the following scenarios: Continue reading