Options for the Marital Home After Divorce

September 02, 2011 (Press-News.org) Options for the Marital Home After Divorce

Property division can be a contentious part of divorce proceedings. Center to those negotiations is the marital home. For the vast majority of homeowners, the house is the most significant asset owned. Both spouses likely have title to the home, and both spouses are likely co-borrowers on the mortgage itself. While resolving the status of the home can be tricky, there are options that can make each party to the divorce satisfied with the outcome while protecting the credit of each.

Assess the Home

Just because the house is the most valued asset does not mean each party to the divorce should fight tooth and nail to keep it. The added living expenses for each ex-spouse after divorce can make paying the existing mortgage difficult. Even with children who are used to living in the home, it can often be simpler to sell the home and find someplace more appropriate to live, keeping in mind new living arrangements. If the home can be kept affordably by one spouse or the other, then there are two primary ways to obtain title and the mortgage in the sole name of the ex-spouse who will be living there.

Refinancing vs. Negotiating With the Lender

In order to release title to a house, one spouse should sign a quitclaim deed to the home. Who ultimately releases title to the home will be determined during divorce negotiations. This is a relatively simple matter to discuss with a family law attorney. However, a quitclaim deed does not remove a co-borrower from the mortgage itself. This means that other actions by the ex-spouse, such as other credit problems, could ultimately affect the home mortgage. In order to avoid putting the homeowner's credit at risk, there are two methods to remove a co-borrower from the mortgage.

The more commonly known option is to refinance the home in the name of one ex-spouse only. Refinancing does bring additional concerns, however. One is the expense of refinancing. With current low interest rates, it can sometimes be profitable to refinance anyway -- but it often takes a few years to recoup the initial expense, which can run in the thousands of dollars.

A second, less known option involves asking the lender to remove the name of the co-borrower from the mortgage document. In order to release liability for an ex-spouse, the lender will usually charge $300 to $1,000 for execution, as well as an application fee that can be up to $500. In addition, there is no guarantee a lender will allow a release of liability on the mortgage. However, if the applicant threatens to refinance with another lender, the existing mortgage holder may be more willing to accommodate the request. Of course the ability to refinance itself may be a problem if the home is "upside down."

A Home Without Equity

A very common occurrence in today's economy is a divorce accompanied by a home with no equity, or even one with a mortgage that is significantly higher than the home's value. In that situation, the prospect of a foreclosure or a short sale further complicates matters. Because of the effect on each spouse's credit score, possible tax ramifications, and the potential responsibility of a spouse for "Watts" charges, a consultation with an experienced and knowledgeable attorney is a must.

Contact an Attorney

Deciding what to do with the marital home depends on individual circumstances and a family law attorney should be consulted before making any decisions. If you are contemplating divorce, contact a divorce lawyer in your area to discuss your situation.

Article provided by Holstrom, Sissung, Marks & Anderson, APLC
Visit us at http://www.coronalaw.com