Divorce - A Quitclaim Deed Does Not Release You From Obligation On The Loan
It's a common misconception that if "I give her/him the house" you are done with the responsibility for the loan.
If you are signed on the loan, the lender will hold you responsible for the payments whether you have an ownership interest or not. "Giving the house" is often referred to as a "quitclaim". In a quitclaim deed, you are resigning from ownership of the house, but it doesn't take you off the loan. It is sometimes erroneously called a quickclaim deed.
The lender wants to keep everyone on the hook for the loan payments
The lender got you and your spouse to personally guarantee the payments, and they don't care if you're divorcing. All the future performance on that loan will follow you until that loan is paid off. The house either needs to get sold or the other spouse needs to refinance the loan into his/her name.
Your credit will continue to be impacted if the "in the house spouse" misses payments or if the house goes into foreclosure.
Sever those bonds to the mortgage!
Be extremely cautious of divorce agreements that leave you on the loan, especially if the payment is realistically too high to handle.
If there is more owed on the house than it's worth, you should consider a short sale. In a short sale, the lender agrees to let the house sell for an amount SHORT of the payoff. In an ideal short sale, the lender forgives the deficiency and you never have to pay it back. It varies from case to case.
Getting rid of marital debt may be more important than keeping the marital home
Please have a frank discussion with your divorce attorney about liquidating the debt on the marital home. Do you really want to be dependent for years on your ex's ability and willingness to pay on the loan?
Please call a Realtor who specializes in short sales. You need a realistic assessment of the value of the house in today's current market. I have seen too many cases where the spouse got stuck with an unsellable house even though it appraised for much higher than what it can actually sell for. After months or years of trying to sell the house for "appraised value" the spouse figured out they're stuck and need a way out to avoid foreclosure.
In the Louisville KY and the surrounding counties, please call Dave Halpern at (502) 664-7827.
Dave Halpern, Realtor
Dave Halpern Real Estate Group
Keller Williams Realty Louisville East