With the state of the economy today many people are dividing up debt rather than assets in divorce. One of the biggest decisions divorcing parties must make is what to do with their home. It is more difficult these days for one party to qualify for a mortgage or to refinance a home than it was a few years ago.

Alan Burke is a Loan Officer for American Mortgage and Equity Consultants, Inc. He says, “If there is a home involved in a divorce, the home is awarded to one party or the other. The divorce decree can stipulate who the responsible party is for the home and the mortgage, but the credit impact does not end there for the other party, if the mortgage was taken out in both names. The other party will still have the mortgage reporting on their credit report, and will incur the ill effects of negative credit rating if the court-ordered party does not pay the mortgage as required.

“A mortgage is a contract. It is a commitment to repay the money that was loaned to you. Mortgage companies do not recognize divorce decrees, they recognize the parties who applied for the mortgage and expect all applying parties to adhere to the terms and conditions of the mortgage they signed for at the closing of the loan. Therefore, it is important to decide before the divorce what decision to make regarding the mortgage and how it can affect your personal credit.”

Questions to Ask Yourself about your Home and Divorce

  • Does it make more sense to sell the house before the divorce?
  • Can one person qualify on their own to refinance the mortgage in just their name?
  • Can one person afford the whole mortgage and their other financial responsibilities on their own after the divorce?
  • If you cannot afford the home, do you trust the other person to maintain timely payments on the mortgage, and other debts that are in both of your names? (just like the mortgage companies, credit card companies do not recognize divorce decrees)

Weighing your mortgage and credit options are very important when a relationship ends. Maintaining good credit will help ease the transition after the divorce. Being realistic of what your capabilities are to repay debt and what the other parties capabilities will be are very important to consider while determining post divorce responsibilities.