When a couple decides to get divorced, they may simply decide to sell their home. They can then use the proceeds to pay off the mortgage and split any remaining money. This satisfies property division requirements.
But in other cases, one person wants to keep the home, even after the divorce is finalized. They may agree to exchange other marital assets. Say that the home is worth $200,000 and the couple also has a retirement account with roughly the same value. The person who wants to keep the house may agree to give up their right to a portion of the retirement account in order to do so.
But it is likely that the couple applied for their initial mortgage together. After the divorce, who is responsible for making those monthly payments?
Refinancing the mortgage
Generally, what happens is that the person who decides to keep the home also needs to refinance the mortgage. From the perspective of the mortgage lender, both members of the couple would still be responsible for the payments otherwise. Even though they got divorced and went through property division, they would both still be listed on the mortgage paperwork.
If the new sole owner refinances, then they are the only one who has liability for future mortgage payments. This can create the separation they are looking for, ensuring that there will not be future financial issues if that person falls behind on their mortgage payments.
It is important to know how to address complex assets during a divorce, and couples must be aware of the legal options at their disposal.