April 14, 2024

Business Bib

Business & Finance Blog

Getting a Housing Lån after Divorce

3 min read

Getting a housing loan after the divorce can be very challenging. A divorce may end people’s marriage, but the finances of both parties remain intertwined for many years, adding to the challenge of getting a loan.

 

So what can people do?

As a simple rule, people want to try to separate their payables and finances from those of their ex-partner as much as possible. Even if their parting was civil and their ex-partner’s finances are pretty solid, every financial link they continue to share will only add another layer of complexity and uncertainty to their own financial picture – and both parties would want that to be unhindered and clear-cut as possible when they apply for housing credit.

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Ideally, people want to do all that as part of their divorce settlement since it can be pretty challenging to extricate themselves from any remaining financial arrangements after the proceedings. But it can also be done after the divorce is finalized if the other party is more than willing.

Getting off the old housing debenture

For instance, since we are talking about home mortgages, suppose the borrower and their ex-partner are both listed on the loan contract they shared. If they didn’t retain possession of the property after the proceeding, they want to make sure their name comes off that debenture and that they are no longer liable for payments.

In most instances, the party who retains the house will agree to accept the full responsibility for the loan as part of the decree and will make all remissions going forward. But that still does not get the person off the hook if they are the one who did not get the property.

As far as the lending firm is concerned, they are still on the housing debenture and are still liable. The decree only applies to the two parties – their mortgage lending firm is not a not part of it. So if their ex-partner fails to hold up to their end of the bargain and misses a credit payment that is a blemish to their credit as well.

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And if the other party should stop making monthly amortization and defaults on the house, the lending firm can come after them to collect – which is an even worse blemish on their record. Even if the other party is responsible and religiously keeps up the assumed mortgage payments, the debenture still represents a possible claim on your finances. A lending firm will take a closer look at you when considering you for a housing debenture of your own.

A lot of individuals assume that when they sign a quit-claim deed that absolves them from any responsibility for the loan. But the deed will only take their name off the contract for the mortgage – the credit itself is a separate matter. To get the person’s name off the loan, they can see if the lending firm will allow their ex-partner to assume the mortgage, that is, to take responsibility.

The bad news is, that is pretty hard to do in today’s world unless they have a Federal Housing Admin or Veterans Affairs debenture. More often, the only way people can get their name off the debenture is for the other party to refi it in their name alone – which replaces the old mortgage loan with new ones.

If the person cannot get their name off the billig lån by their ex-partner has taken over the responsibility of paying it, they will at least have to be able to show to the lending firm that the other party has taken full responsibility. To do this, they will need to get copies of twelve months of canceled checks or a document that they have made the full housing debenture payments for at least twelve months.

Joint accounts and credit cards

Another thing people want to do is close out joint accounts they held – car, credit cards, and other credit accounts. When it comes to credit cards, one party will usually agree to pay for the balance as part of their divorce settlement. Make sure to straighten things out in advance, ideally part of the settlement; the easier time people will have when applying for a loan on their own or with a new wife or husband.