Should I or my spouse keep our house after a divorce?

Removing one spouse’s name from a home’s title does not remove that spouse’s responsibility for a joint mortgage.

Among the many things that divorcing parents in Tennessee often want is to keep their family homes. This can understandably provide a level of stability and security for children during an otherwise tumultuous time filled with change. However, both adults in the matter should approach this decision with great care before choosing to do this.

Keeping a home might prevent kids from having to move but it may also signal financial disaster for the spouse who leaves the home.

Mortgages and titles are separate

As explained by Time Money, a bank that loans a couple money for a home mortgage does not necessarily consider the names on the deed of the home to matter all that much it seems. In a divorce, if one spouse agrees to have their name taken off the title but the associated mortgage is in both spouse's names, the bank will still consider both parties liable for the debt.

This can be the case even if a divorce decree specifically identifies home loan responsibility to the party who wants to stay in the house.

Given this, the person who leaves the home may end up suffering credit problems or even being hounded by a bank seeking money if the person who stays in the home fails to make mortgage payments.

Refinancing is one safe option

In order to avoid being on the hook for a home loan without the benefit of any ownership in the property, spouses should require that their partner refinance the mortgage to a solo loan in order to keep the house.

The Mortgage Report confirms that doing this may not always be easy for a newly divorced person. Divorce is one life experience that may result in a lower credit score and a higher debt-to-income ratio, making obtaining a new mortgage a challenge at times.

According to Bankrate, the new tax law that changes how alimony is taxed may also have implications for the amount of money that each spouse can claim as income and this may factor into the ability to get a new mortgage.

Selling is the safest option

For the reasons outlined above, selling a marital home may well be the safest financial option. However, it is important that couples carefully evaluate the tax implications of doing this, especially in light of any other decisions being made as part of their divorce settlements.

The complexities involved in keeping, refinancing or selling a family home during a divorce are just some of the reasons that divorcing couples in Tennessee should always work with an experienced family law attorney.