How about getting rid of the mortgage debt altogether via a short sale? Let’s explore.
Dividing the excess home equity in a divorce used to be a primary point of contention. Today it seems that dividing the debt is a primary issue.
Millions of homes nationwide have “underwater mortgages” meaning more owed than the house is worth. Leaving that debt in place is fraught with peril.
What if I deed my house to the other spouse?
Remember, no matter what the divorce agreement says, the parties who originally signed their obligation on the existing mortgage debt remain personally liable to repay the loan.
Transferring ownership of the house DOES NOT automatically release the borrower’s liability on the debt unless the debt is paid off in the transfer or refinanced into the other spouse’s name only.
Doing a “quitclaim deed” is not enough.
- If the loan has not been paid off, the original borrowers are still on the hook.
- If the mortgage payments aren’t made, all borrowers get their credit "dinged."
- If the house gets lost to foreclosure, all borrowers could be pursued with a deficiency judgment, which could lead to wage and bank account garnishments.
The lender simply does not care about the divorce agreement, divorce court orders or what the divorce lawyers or mediators agreed to. Those agreements only reflect the dispute resolution and payment arrangements between the spouses and does not obligate the lender to release one of the borrowers.
When it comes to the mortgage debt, it is also a good idea to consult with a real estate attorney.
How about getting rid of the mortgage debt altogether?
Even if there is too much owed on the house, there is a process called a “short sale.” In a short sale, the lender allows the house to sell for an amount SHORT of the payoff. The lender allows a short sale if they believe it is in THEIR best interest rather than enduring the tremendous cost of a foreclosure on an unsustainable mortgage.
A successful short sale in a divorce situation can avoid years of stress and disputes between the spouses.
Call a Realtor who specializes in short sales
If in Louisville, KY or surrounding counties please call me, Dave Halpern, Real Estate Broker of Louisville Short Sale Expert Realty Company. I am local, I am real, and have helped many divorcing couples get rid of their risky mortgage debt forever. I will gladly discuss all aspects of the short sale with you and/or your divorce attorney. You can check out my website customized to divorce and foreclosure and short sale issues: www.LouisvilleDivorceForeclosureShortSales.com
Your lender pays all real commissions so you don’t have to. Many testimonials available.
Not intended as legal advice. Please consult an attorney on all legal matters.