Should I let my spouse keep the house?
Texas residents who get divorced should think twice before agreeing to let a spouse keep a family home after a divorce. Unless that spouse obtains a new solo mortgage, the other person is vulnerable to future financial and credit problems.
A divorce can be one of the most emotionally challenging experiences a person endures. Many studies have ranked it high on the list of life stressors. While finding ways to shore oneself up emotionally during a divorce, Texas residents should take care in protecting themselves financially as well.
One of the biggest and most valuable assets many couples share is the family home. When one spouse wants to keep the house after the divorce, the other person should take appropriate actions to ensure they are cleared of any future financial responsibility for the mortgage on the property.
A bank’s view of mortgages and homes
As explained by The Mortgage Reports, banks view mortgages and homes as two separate things. If a couple’s divorce decree indicates one spouse will obtain ownership of the home and the associated financial liability for the mortgage but the existing joint mortgage remains intact, both parties are responsible for the loan in the eyes of the bank.
That means that if the spouse who receives the home fails to make any payments, the bank can initiate collection activities against the other spouse. Any late payments would be reflected on both spouses’ credit reports.
Refinancing into one person’s name
According to Bankrate, the only way to clear one person’s responsibility for a mortgage is to have the other party obtain a new mortgage in their name only. This can be challenging in the wake of a divorce, as a person’s income and credit score often drop at this time. The amount of equity in the property may end up being a key factor into if the refinance is possible.
The importance of property valuation
When a new mortgage is sought, an appraisal must be done for the lender to approve the loan amount. However, this is not the only reason a home valuation is important. NerdWallet notes that divorcing couples should obtain and agree upon a home value early on in the process to help them assess their options. It may well be that the home appraisal indicates a sale is the best option. The value of the home may also impact the decisions they make regarding other aspects of their divorce settlement.
Legal help is a must
Divorcing Texas spouses should always consult with an attorney before making any final agreements regarding their homes or other assets. This may give them the chance to understand the full implications of their choices and protect their current and future interests.