When two people enter a permanent union like marriage, they plan and dream the rest of their lives together. However, it doesn’t always end the way it was planned. The repercussions of the separation remain.
One of these repercussions is the home mortgage. The house is usually the main investment of a married couple. After divorce, it becomes a burden that they may no longer choose to shoulder. The best way to settle this is to consult the law.
What should be clear to all parties is that the rights of any creditor to collect on the debt incurred will not be affected in any way by the divorce.
When the House is Community Property
One important question with regards to property is to determine whether it is the separate property or community property (also known as marital property). Separate property is clearly owned by the spouse that acquired it prior to the marriage or inherited it during the marriage.
The case that needs to be settled are the properties that have been purchased during the marriage. Since this is community property, the easiest way to settle the division is to sell the house and divide the proceeds.
It will be more complicated if one spouse decides to live in the house. If there is still a mortgage that has to be settled, then there are other things to consider.
There could be a settlement between the ex-spouses. For the spouse that chooses to live in the house, the property would then be considered as his/her ownership henceforth. Thus, the usual agreement would be for the residing spouse to assume responsibility for subsequent payments.
There could be other arrangements. If the ex-spouses have children, then the house is their shared responsibility. Whether this entails an equal division or a greater sum to the residing spouse, this can be arranged between the two parties.
Lending Institutions
Any settlement between the ex-spouses, however, will not affect the standing with the loan or mortgage company. As far as they are concerned, payments of the loan are the responsibilities of both ex-spouses.
In this case, the lending institution can sue both the ex-spouses if the property is foreclosed due to late payments. They can still exercise any legal means to collect payment of the debt incurred.
Thus, there is also a mechanism that ex-spouses can use to ensure consequences for the negligent ex-spouse. This is called a Deed of Trust to Secure Assumption, which will be executed after the divorce has been finalized. This deed is a way to protect the responsible spouse, who can assume ownership of the house—whether he/she is the one who chose to live in the house or not.
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