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Ask Brian: Whose Name Should the House Be In After a Divorce?



Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question from Brent in WI: Hi Brian, I was divorced six months ago, and my ex got the house in the settlement. I agreed to that but now I’m concerned because the mortgage is still in my name. Is this the way it is supposed to happen? If not, what should I do about it?

Answer: Hello Brent. I’m not an attorney but sorry to say, you may have a big problem on your hands. I’m assuming that one of two things happened with your divorce settlement. Either you didn’t have an attorney handle the settlement or something has fallen through the cracks. For your sake, I hope it is something that has fallen through the cracks, and you can still correct it. The first thing you should do is read your divorce settlement with an eye towards finding a requirement that your ex refinances the house in her name. If you find that requirement in the settlement, your solution could be as simple as pointing out to your ex that she is required to refinance the house into her name. If you do NOT find it in the settlement and you did have an attorney draw up the settlement, contact your attorney immediately before this becomes a massive liability for you.

Brent, obviously I don’t know all the facts. However, if your ex refinancing into her name isn’t in the settlement, just giving her the house without this requirement was a big mistake. A mistake that you may have a lot of trouble correcting. That’s why you always hear advice about going through an attorney when significant liability issues are at stake. In this situation, you face two big issues until the mortgage is paid off. I’ll go into more detail below but first; your credit rating will be at risk as long as your name remains on the mortgage. Second, you may find it exceedingly difficult or impossible to purchase another home with a mortgage until this is resolved. Both can be very serious problems if it will be decades before the mortgage is paid off or refinanced by your ex or someone else.

You could try sending a copy of the divorce paperwork to the mortgage company showing that your ex is now the sole owner of the house and responsible for making the payments. But I seriously doubt this will help you at all. I’ve never heard of a lender removing a person named on a promissory note secured by a mortgage or deed of trust without foreclosure or the note being paid off. That is why you want your ex to refinance the house. You want her new loan to pay off the old loan that your name is on and make her responsible for the new mortgage.

Until the house is refinanced, the best you can hope for is that your wife stays current with the payments. As long as she does, at least your credit rating will not be impacted. If you value your credit rating, you might want to look at ways you can stay informed that the mortgage payments are being made. Your name is still on the mortgage so you should not have any trouble getting this information from the lender. To keep your credit intact, you could also make any payments that your ex fails to make. If you decide to do that, timing is important because you don’t want the mortgage company reporting any past due payments to the credit bureaus.

Even if you do keep your credit rating in good standing, you could be facing another big problem. Specifically, qualifying for a mortgage on another house or condo. A big part of a mortgage application requires that you list all your outstanding financial obligations. As long as your name is on the mortgage for your ex’s house, that obligation will show up on any mortgage application report (and probably any other credit application). Don’t assume that a new mortgage company is only going to hold you responsible for half of the outstanding debt on your ex’s house. The way that almost every mortgage works are that you are still responsible for 100% of the outstanding debt. A large debt like that could easily prevent you from qualifying for a new mortgage on a house or condo for yourself.

Brent, in a nutshell, here is what probably should have happened in a typical divorce. You would have agreed to give the house to your ex but with the requirement that she refinance the remaining debt in her own name. You would be giving up the equity that you owned in the old house, but your wife would become responsible for the remaining debt. Timelines vary but typically she would have 3 to 6 months to complete the refinancing. If she doesn’t do that or doesn’t find another way to remove you from the mortgage, you would have the right to force the sale of the house. The court that granted the divorce would have jurisdiction to order the house sold. Once the house was sold, the buyer would pay off the old mortgage that you are currently responsible for, and all your related problems should go away. Because you agreed to give the house to your ex, all proceeds from the sale would probably go to her.

Brent, it might be too late for you to correct this mistake, but you should still talk to an attorney to see if there is anything that can be done in your jurisdiction. If nothing else, hopefully, other readers will learn from the situation that you now find yourself in.

I’m always open to other suggestions. Please leave your comment.

Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to askbrian@realtybiznews.com.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, near a national and the Pacific Ocean.

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