Splitting up is hard to do, especially when it comes to the marital mortgage debt. When a couple divorces, a judge can decide who keeps the home. Typically, the spouse who keeps the home also takes on the entire mortgage debt. You must consider which, if any of you, can reasonably afford to take on that financial responsibility.
Dividing the Marital Home
Parting ways may require you to sell the home, refinance the mortgage or keep the mortgage as-is and assume sole responsibility for the mortgage debt. In a divorce, the goal is to divide the marital assets and the marital debt fairly. One spouse can't be forced to keep a home and mortgage she can't afford, or reap the full benefits of homeownership without taking on the mortgage or giving up another asset of equal value.
Loan Assumption Due to Divorce
A mortgage lender can call your loan due for several reasons, but not over divorce. A 1982 federal law known as the Garn-St.Germain Acts prevents lenders from forcing the sale or refinance of a mortgage debt when a couple divorces. Instead, the spouse who keeps the marital home can take sole responsibility for the mortgage payments through the assumption process. A loan assumption allows a transfer of ownership and leaves the loan intact -- same interest rate, loan terms and balance. Lenders typically charge a fee for a loan assumption, but it's cheaper than refinancing.
Deed vs. Debt
You can sign the home's title deed over to your spouse, but the mortgage debt obligation doesn't change. Unless you make assumption or refinance arrangements for the transfer of the mortgage debt responsibility, it's business as usual and you're still obligated on the loan. This means that a default on your ex's part would hurt your credit, as late payments and foreclosure ends up on both of your records. You also want to get a "release of liability" if you go the loan assumption route, as it releases you from future obligation and penalties for missed mortgage payments.
Deed, Decree and Debt
Because the deed, the divorce decree and the mortgage debt are all separate issues, you have some work to do to fully settle house matters. The spouse named as the sole homeowner in the divorce decree should notify the lender if she's taking over the loan as well. The lender likely will request a copy of the decree. The remaining spouse also must ensure her name is on the title deed and the ex relinquishes his ownership interests -- usually via a quitclaim deed. The deed also should be recorded at the county recorder's office.
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