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Mortgage debt: What happens during divorce?

Shortly after getting married, you and your new spouse went to a mortgage lender and got a loan. You bought your first house. It was in a beautiful little neighborhood where you always wanted to live, and it felt like everything was perfect.

Unfortunately, the marriage did not last. After a few years, you and your spouse decided it was time to get divorced.

However, your spouse wanted to keep the house. You wanted to move out of Ohio for a new job, so that was fine with you, and you agreed. In the divorce decree, your spouse agreed to keep making the mortgage payments and to keep the house.

Did you do enough?

You still owe that money

The problem with a solution like this, as simple and straightforward as it seems, is that you still owe the money on the mortgage loan because it is still in your name. The divorce decree in no way gets you out of debt. In the future, if your ex stops paying, it can ruin your credit and the lender may contact you to ask for payment on a home you moved out of a long time ago. Most mortgages are 30 years long, so you could be well into another stage of your life when this happens.

"The risk is that the bank or lender can still pursue both parties for collection," one financial expert noted. "And what if the spouse isn't paying the mortgage because that spouse has no money? Then you have a divorce settlement contract that's basically worthless because it says someone else is responsible who can't pay."

So, by using this arrangement, you're really gambling your financial future on your spouse's success. What if they lose their job and stop paying? What if they just want to walk away from the home and they refuse to pay? No matter how sincere they seemed during the divorce case, do you really want to trust them for the next 30 years?

"A jointly acquired home loan has the unfortunate potential to become a disaster for your credit during a divorce," another expert added. "Your mortgage lender will not care about your divorce decree."

Many people feel shocked when they find out that they still have to pay, pointing to that divorce agreement. But all the lender really cares about is whose name is on the loan, and yours still is.

Your options

Of course, you do have options. Your ex can refinance the house, for instance. You can reject their offer to keep it and sell it to a third party. The key is to look into all of your options and to really understand the long-term ramifications of the debt-based decisions you make.

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Rising Star Susan M. Suriano WBA OHIO Women's Bar Association Woman Lawyer of Franklin County Young Leaders of Licking County

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