When couples in California divorce, asset division is often a primary concern. If the couple owns a house that has not yet been paid off, determining what happens to the property, as well as its mortgage, will be a major consideration in the divorce.
Mortgages often represent a significant percentage of a couple’s overall debt. As a result, responsibility for the mortgage should be determined during the divorce process. In many cases, couples will elect to sell the marital home and divide any equity between themselves. However, there are some instances in which one spouse would prefer to keep the family home.
When the decision is made to not sell a marital home, the couple must make one of several choices. In some cases, a couple may opt to continue paying their existing mortgage. The danger with this is that the spouse who moves out of the family home no longer has any rights to live in the house but will be responsible for making mortgage payments. If the spouse who remains in the home fails to make payments, for example, the spouse living elsewhere may suffer damage to his or her credit. This option is frequently discouraged by attorneys because it is considered financially risky.
Other options include one spouse refinancing the mortgage in his or her own name. However, some individuals are reluctant to do this because their credit rating, particularly after a divorce, may not qualify them for optimal interest rates. A third option is for one spouse to simply assume responsibility for the current mortgage, something that might be provided for in a mortgage’s promissory note.
It should be noted, however, that many mortgages, particularly those entered into after 2008, do not include a provision for mortgage assumption. In such cases, the couple will have to explore other options. An experienced family law attorney may be able to provide guidance on making the most prudent choice.