The transfer of the marital house can become a mine field of financial woes. They may include:
- Sometimes the divorce judgment does not specify a date by which the house is to be refinanced, nor what happens in the event that the receiving spouse is unable or unwilling to obtain a new mortgage.
- Sometimes one spouse receives the home and agrees to refinance the home to remove the other spouse’s name from the mortgage, but fails to do so.
- Sometimes the vacating spouse executes a quit claim deed in favor of the receiving spouse, giving that spouse sole title, but is then unable to get a mortgage to buy a new home because the old mortgage has not been refinanced.
- Sometimes the spouse who remains in the home defaults on the mortgage and the property goes into foreclosure, with the missed payments and foreclosure proceedings appearing on the innocent spouse’s credit report.
If possible, all refinancing issues should be worked out before the divorce is complete, and both parties should know that the receiving spouse qualifies for a mortgage. The divorce judgment should include provisions stipulating a timetable for refinancing, which may include a condition that the home is sold and the proceeds applied to any joint encumbrances if the home is not refinanced by a specified date. It may also include a provision describing remedies in the event of any default or foreclosure before the refinancing of the home.