Getting Divorced? Don’t Forget the Mortgage

One of the most important things to understand during a divorce is that your divorce decree does not remove either spouse from a joint mortgage.

Even if the settlement says one spouse is responsible for the mortgage, both spouses remain legally responsible to the lender until the loan is paid off.  If a payment is missed, it can affect both spouses’ credit.

There are generally two ways to remove a spouse from the mortgage debt: refinance the home into one spouse’s name or sell the home and pay off the mortgage. A quitclaim deed or a provision in the divorce agreement does not remove someone from the loan, only from legal ownership. Even after a quitclaim deed that spouse still remains obligated on the entire mortgage debt. 

Arizona law under A.R.S. § 25-318(P)provides a two-year enforcement window for a home mortgage that was not paid off by the spouse that was legally obligated under the Divorce Decree. The other spouse can seek enforcement through the court within two years after the date the debt should have been paid or otherwise resolved. 

The key takeaway is that the spouse who remains on the mortgage continues to have potential liability and credit exposure until the loan is actually refinanced or paid off.

If the parties are intending to have one spouse refinance it is best practice to speak with a mortgage professional and get pre-qualified for the refinance before the divorce settlement agreement is signed.

For example, our Team will be able to provide an estimated range of value for your home which is critical, review credit, and calculate qualifying income.

Liabilities like child support or spousal support can afffect the ability to qualify, so avoid costly surprises by chatting with our local mortgage team for your refinancing options.

Want to learn more?

Request your FREE copy of “Divorce and Your Home,” published by Magnolia Mortgage/ The Mortgage Picker in Arizona.