When a divorce is tried, the judge usually either requires a marital home to be sold, with the proceeds divided between the spouses, or it orders one spouse’s name to be removed from the deed and mortgage. Removing a name from the deed is easy but getting a name off of the mortgage is another story.
When you take out a mortgage, the bank usually requires both spouses to sign the note agreeing to pay the bank back. Since the bank is not involved in your divorce action, it is not bound by any agreements you make with your spouse, or even by a judge’s orders. The only ways to remove a spouse’s name from the mortgage are to refinance the mortgage and remove the ex-spouse’s name or to ask the lender to remove the ex-spouse’s name from the mortgage. This second option is rarely available. Either way, lenders will run a separate credit check considering only the spouse remaining in the home. If your home is “under water,” (you owe more money than the house is worth), neither of these options will be available.
A judge can order a divorcing couple to refinance their home to remove a spouse’s name, but if no bank will approve the refinancing, both spouses will remain legally obligated, regardless of who lives in the house or whom the court has ordered to pay the mortgage.
If a spouse is having difficulty getting approved during the divorce, refinancing after the divorce is complete can often be a better option. For example, child support or alimony (maintenance) can be considered income after several months of receiving payments.
Refinancing during or after divorce can be tricky, and it is always wise to seek the advice of an attorney to make sure all available options are considered.