Murphy & Dunn - Custody, Divorce & Family Law Matters
Free Initial Consultations
309-740-9091
Serving Peoria, Bloomington and Central Illinois

Illinois property division: Mortgage issues to watch for in Divorce

Deciding who keeps the marital home or whether to sell the home is a difficult decision. When there are school-aged children it may be hard to move them from the home in which they have grown up. A location near a school or in one of the best school districts may mean one parent wants to keep the home. 

While the marital property division contained in the divorce decree will award a home to one of the former spouses, the decree does not operate to transfer title. A joint mortgage could also become a problem down the road if not addressed at the time of the divorce.

For the spouse keeping the home, it is important to have your former spouse sign a quitclaim deed transferring any interest he or she has in the home. Then the quitclaim deed should be filed with the local property records department. If the property remains in joint ownership, the ex-spouse will still have a survivorship interest.

Refinancing the mortgage

For the spouse who keeps the home, refinancing can be tedious under new lending requirements. Yet as long as interest rates stay low, a refinance could result in a lower monthly payment.

The spouse who does not keep the home needs to make sure his or her name is no longer on a mortgage. Even after giving up any right to a home through a quitclaim deed, a spouse listed on a mortgage is liable for making payments on the loan if the other defaults.

To provide an example, a wife neglected to ask her ex-husband to refinance the mortgage on their former home during the divorce process. Five years later, his business suffered and he could no longer make payments on the loan. The lender contacted the ex-wife seeking payment. Her credit rating plummeted. The court could not force him to refinance, because the divorce decree awarded him the home, but did not address the mortgage.

Qualifying for a mortgage to purchase a new home

The loan application process has become more rigorous. When the divorce is not yet finalized, a marital settlement agreement may assist with getting credit. Separating banking accounts also helps.

A lender considers child support or alimony as income for qualifying, but may require a six-month history of payments. There must also be evidence that the income will continue for at least three years. A spouse who needs to pay child support or alimony cannot rely on that portion of income when seeking credit. Providing evidence that a past mortgage will be taken over by a former spouse is also important.

When considering divorce, contact an experienced family law attorney for guidance. Immediately seeking the counsel of a lawyer is a way to avoid mistakes that could affect your financial future.

No Comments

Leave a comment
Comment Information
Visa Mastercard American Express Discover Network