Another hidden danger of divorce real estate - joint mortgage after your divorce.
Sound familiar: "I signed the papers. Why is my name still on the mortgage?"
There are only two ways off of a joint mortgage:
- Individually refinance the joint mortgage in the name of one spouse only OR
- Sell the house
That's it. Simply signing papers likely means you gave up OWNERSHIP without giving up DEBT. It means you owe on a house you no longer own.
This is a HUGE mistake.
By signing a quitclaim deed, you transfer your ownership interest (whatever interest you currently have) in the former family home to your EX. Quitclaim deeds are very common in divorce in most states.
After transferring title (deeding ownership to your EX), you cannot force the sale of the house - since you are no longer an owner. But the lender can come after you for full repayment of the entire mortgage.
Because the lender still has two co-borrowers - you and your EX. Your divorce decree has no effect on your lender or other third party creditors (such as credit card companies). Even if you have a hold harmless provision in your settlement or divorce decree/final judgment ending your marriage.
But wait, it gets worse. One late payment on the joint mortgage after divorce drops your credit score (20-100 points). Foreclosure on the joint mortgage is also your foreclosure - a strong negative on your FICO score for up to 7 years. Foreclosure can drop a high credit score up to 200 points, requiring years to get back to where you were.
Bottom line: you're not really divorced if you're still linked through a joint mortgage.
To avoid this and other major real estate mistakes, the best time to protect your financial future is BEFORE your divorce is final.
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