Divorce Your Mortgage to Protect Credit Scores
by Kary from Shelton, CT and by Todd from West Warwick, RI
Divorce your mortgage to protect credit scores: Deciding how to split up the ownership of a home during divorce is complicated enough. Add a joint mortgage obligation and you won't be waiting long to feel the unintended consequences. Meet Kary who was awarded the ownership of the house in her divorce. Yet her ex-husband still managed to take out a 2nd mortgage without her consent.
On the flip side, Todd gave up ownership of the jointly owned home but was left on the mortgage in his divorce. His ex-wife modified the mortgage without his consent which adversely affected his credit.
Ask Kate: Home Refinance After Divorce By Kary from Shelton, CT
First of all, thank you for this great website.
I was advised during my divorce to keep my ex-husband on the mortgage so he could be financially responsible for it as well, but he does not pay anything toward it.
The home was almost lost in a foreclosure during the divorce and I worked so hard to fight the banks for a modification which I finally obtained after a 2 year struggle which was more difficult then the divorce.
I obtained the modification based on my own merits and income. I have the deed in my name only so the home is mine from what I understand even if I sell.
However I want his name off the mortgage since he is getting the benefit of good credit due to my making timely payments on the mortgage and he is not contributing.
I also found out after the divorce that he had a second mortgage on the home. Which I am now getting the bills for even though I did not sign for it. I am afraid he may be taking increases on it as well.
After the modification, my attorney advised me to file bankruptcy in order to get rid of credit card bills. Although they were in our joint names, they became his his responsibility since they were his purchases. Even so, he also stopped paying on them. The attorney included both mortgages, yet I still live here and make my mortgage payments on time every month.
How can I recover from this and just get a normal mortgage in my name only? I have been paying on it for over 3 years now. And what do I do about the 2nd?
I have since started rebuilding my credit and have a credit card which I am only using for emergencies and to establish credit.
The reason I kept the home is that we (my kids) needed a place to live and rent in this state is more expensive then my mortgage payment. Plus the fact that I have invested every cent I ever had in this home and hope to leave it to my children some day. Thanks in advance.
Cry no more, Kary
Kate's Answer: Home Refinance After Divorce
Since finances are at the root of most divorces, it follows that retaining a joint mortgage will be the gift that keeps on giving, even after the split.
If a husband and wife could not agree to stay married, why does an attorney think the couple is emotionally equipped to share the financial responsibilities of a house after divorce? Unbelievable!
You may be legally divorced but as long as your names are both on the mortgage, you are forever joined at the hip.
So what can you do? Here are three options.
1. Credit and Refinance After Divorce
Continue to strengthen your credit profile until you are able to get approved for a refinance. But make sure the refi requires both the mortgage and the title to be in your name if you don't want to keep dealing with your ex. I explain this in more detail at Sell Your House Safely - Title vs Mortgage
By the way, congratulations for the progress you've already made to improve your credit!
2. Investigate 2nd Mortgage Lien Without Your Consent
Start investigating how the 2nd mortgage lender liened the home without your consent! It is time this practice stops!
Request a copy of the final loan documents to see if your signature was forged. If you suspect the lender committed fraud, you will probably need the muscle of an attorney to get the lien off your home.
At the very least, you could ask for the line of credit to be turned off. This won't erase the debt but at least you'd be preserving what equity you may have left and keep the monthly house payment from increasing.
3. Sell the House
The third option might be a last resort. Sell the house and pay off both mortgages. Take the proceeds from the sale, use it as a down payment, and buy another home. One that your ex never owned!
I'm cheering you on!
Ask Kate: Divorce and Loan Modification By Todd from West Warwick, RI
I am recently divorced and signed a quitclaim deed. The divorce decree states my ex is to remove my name from mortgage when able to refinance.
She has since done a loan modification without my signature. I realize now that it is perfectly legal to do so although I do not agree.
My question is if I had signed, would my credit have not been affected negatively?
After reading something else, that is the impression I am getting and if so, why was I not contacted by either my ex or the mortgage company?
How am I able to correct my credit? Thank you.
Kate's Answer: Divorce and Loan Modification
I'm waiting for attorneys who use quit claims in this way to have a light bulb moment.
Here's why. By signing a quit claim, you gave up your right to ownership of the home but remained liable for the mortgage.
How is this a deal? Well... maybe for your ex-wife but surely not for you. Case in point, modifications without both homeowner's signatures are possible under certain circumstances, as you already mentioned.
But had you also given consent, I am not convinced that your credit would have escaped the ill effect brought on by the mortgage modification process.
Liability vs Asset
Until you get your name off both the title and the mortgage, you are at the mercy of your ex-wife. Read more about liability vs asset at Refinancing My Home in Husband's Name
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