Co-own Mortgage after... [divorce]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Ledzep91
Posts: 10
Joined: Fri Jul 05, 2024 2:28 pm

Co-own Mortgage after... [divorce]

Post by Ledzep91 »

Dear All,

Does anyone have any experience with this. If a couple who is divorcing has thought through every angle and decided that they need to co-own the primary residence (for financial reasons) then in this case, does their mortgage needs to mandatory be refinanced or can they continue to keep old rate. The reason being that they are on a lower old mortgage rate and refinance will make it very expensive. If they continue to commit and pay current mortgage together will the bank force them to refinance?

Thanking in advance.
Augustivus
Posts: 49
Joined: Tue Apr 18, 2023 1:19 pm

Re: Co-own Mortgage after...

Post by Augustivus »

In my situation we could've continued, just like we did when we were married. Assuming your divorce paperwork supports this and doesn't force you to do something else.
User avatar
arcticpineapplecorp.
Posts: 15727
Joined: Tue Mar 06, 2012 8:22 pm

Re: Co-own Mortgage after...

Post by arcticpineapplecorp. »

no they don't have to refinance. they can continue co-owning the home as they had while married.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
London
Posts: 774
Joined: Sun Dec 11, 2016 10:50 am

Re: Co-own Mortgage after...

Post by London »

Marriages don’t sign promissory notes, people do. Their marriage status shouldn’t trigger the need to refinance.
Topic Author
Ledzep91
Posts: 10
Joined: Fri Jul 05, 2024 2:28 pm

Re: Co-own Mortgage after...

Post by Ledzep91 »

London wrote: Tue Jul 09, 2024 2:24 pm Marriages don’t sign promissory notes, people do. Their marriage status shouldn’t trigger the need to refinance.
The country of residence is USA... does that change anything?
Topic Author
Ledzep91
Posts: 10
Joined: Fri Jul 05, 2024 2:28 pm

Re: Co-own Mortgage after...

Post by Ledzep91 »

arcticpineapplecorp. wrote: Tue Jul 09, 2024 2:24 pm no they don't have to refinance. they can continue co-owning the home as they had while married.
The country of residence is USA... does that change anything?
User avatar
arcticpineapplecorp.
Posts: 15727
Joined: Tue Mar 06, 2012 8:22 pm

Re: Co-own Mortgage after...

Post by arcticpineapplecorp. »

Ledzep91 wrote: Tue Jul 09, 2024 5:57 pm
arcticpineapplecorp. wrote: Tue Jul 09, 2024 2:24 pm no they don't have to refinance. they can continue co-owning the home as they had while married.
The country of residence is USA... does that change anything?
no, I live in the USA and I can definitely say it's quite possible to co-own a home with your ex. Ask me how I know.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
Ledzep91
Posts: 10
Joined: Fri Jul 05, 2024 2:28 pm

Re: Co-own Mortgage after...

Post by Ledzep91 »

arcticpineapplecorp. wrote: Tue Jul 09, 2024 6:17 pm
Ledzep91 wrote: Tue Jul 09, 2024 5:57 pm
arcticpineapplecorp. wrote: Tue Jul 09, 2024 2:24 pm no they don't have to refinance. they can continue co-owning the home as they had while married.
The country of residence is USA... does that change anything?
no, I live in the USA and I can definitely say it's quite possible to co-own a home with your ex. Ask me how I know.
Thanks. I understand one can co-own just making sure it does not trigger a mandatory refinance. Many thanks in advance.
User avatar
arcticpineapplecorp.
Posts: 15727
Joined: Tue Mar 06, 2012 8:22 pm

Re: Co-own Mortgage after...

Post by arcticpineapplecorp. »

Ledzep91 wrote: Tue Jul 09, 2024 6:23 pm
arcticpineapplecorp. wrote: Tue Jul 09, 2024 6:17 pm
Ledzep91 wrote: Tue Jul 09, 2024 5:57 pm
arcticpineapplecorp. wrote: Tue Jul 09, 2024 2:24 pm no they don't have to refinance. they can continue co-owning the home as they had while married.
The country of residence is USA... does that change anything?
no, I live in the USA and I can definitely say it's quite possible to co-own a home with your ex. Ask me how I know.
Thanks. I understand one can co-own just making sure it does not trigger a mandatory refinance. Many thanks in advance.
right, sorry, forgot your original question. In my case it did not trigger a mandatory refinance. For starters if it was mandatory, we'd have to have told our mortgage company we got divorced and if we were supposed to do that, I wasn't aware, and didn't. So they didn't know our marital status had changed. Perhaps they should have been informed? But no one told us to do that, so we didn't. I'm pretty sure they were mostly concerned with getting their monthly payment. I do understand it would be more favorable to them to relend at a higher rate. At the end of the day, they lent to two people who were responsible to pay the mortgage. If one didn't the other would have or it would have been negative consequences for both. And the mortgage company didn't care which of the two (if not evenly split) was paying as long as they got paid.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
123
Posts: 10790
Joined: Fri Oct 12, 2012 3:55 pm

Re: Co-own Mortgage after...

Post by 123 »

Sharing a old mortgage after divorce may limit the ability of one or the other (and possibly both) to get another mortgage with a new spouse or partner. That's usually when things that seemed like they should work out begin to fall apart. Eventually one person wants/needs their equity out before the other.

If the property has had significant appreciation it may be better to sell it when the potential $500K (couple) capital gains exclusion applies. If one party no longer lives in the home or it gets used as a rental a significant tax advantage may be lost.
The closest helping hand is at the end of your own arm.
LotsaGray
Posts: 1600
Joined: Sat Mar 25, 2023 2:08 pm

Re: Co-own Mortgage after... [divorce]

Post by LotsaGray »

Without many other details no one here can provide any kind of "optimization advice".

But divorce alone should not force refinance, but it can cause issues. But OP did not ask for advice on that.

Doesn't even need to be co-owned (though that is the only way I would consider it). One spouse can be removed from title but remain on the mortgage. They would have zero ownership but have 100% liability. So I don't know why someone would agree to that.

Divorce does allow a person to be dropped form mortgage SOMETIMES. The other spouse would need to be able to qualify and it would need to be so one of the loans that allows this. (FHA loans allow this. VA loans allow it. I don't believe that most Freddie ones do.) But where this can be done it allows one spouse to be free of ownership AND free of mortgage.

If highly appreciated, it might be better to sell. The spouse remaining, needs to somehow "pay" the leaving spouse (though this can be done by other property settlement splits). But also if highly appreciated, then what staying spouse sells there could be a tax bill that could be avoided by a sale now.
LotsaGray
Posts: 1600
Joined: Sat Mar 25, 2023 2:08 pm

Re: Co-own Mortgage after...

Post by LotsaGray »

Ledzep91 wrote: Tue Jul 09, 2024 5:56 pm
London wrote: Tue Jul 09, 2024 2:24 pm Marriages don’t sign promissory notes, people do. Their marriage status shouldn’t trigger the need to refinance.
The country of residence is USA... does that change anything?
Note you are posting under a US Investors heading. If the residence WAs NOT US then who knows if the answers are meaningful. But US will be the default assumption here.
bberris
Posts: 2481
Joined: Sun Feb 20, 2011 8:44 am

Re: Co-own Mortgage after... [divorce]

Post by bberris »

You don't own a mortgage. You owe a note. The mortgage is the right to foreclose if you don't pay. Two people can be obligated by a note even if only one owns the house.
Topic Author
Ledzep91
Posts: 10
Joined: Fri Jul 05, 2024 2:28 pm

Re: Co-own Mortgage after... [divorce]

Post by Ledzep91 »

bberris wrote: Wed Jul 10, 2024 5:41 am You don't own a mortgage. You owe a note. The mortgage is the right to foreclose if you don't pay. Two people can be obligated by a note even if only one owns the house.
Thanks. My apologies for not being so knowledgeable. This explanation helps. So, basically they can co own and continue in the same/existing/old mortgage rate so long they don't lapse on payments.
bberris
Posts: 2481
Joined: Sun Feb 20, 2011 8:44 am

Re: Co-own Mortgage after... [divorce]

Post by bberris »

Your divorce agreement or judgment needs to spell out what happens to the house. Ownership is separate from the note. Generally one ex quit claims ownership to the other. But both would remain legally obligated to pay on the note, assuming both signed, if it is not refinanced. This would be true even if your divorce agreement says that one spouse would be making payments. If the one defaults, the bank could sue the other if foreclosure didn't cover the amount due.

If both spouses signed, the note and monthly obligation will be on the credit file of both and could affect their ability to get other credit.
toddthebod
Posts: 6988
Joined: Wed May 18, 2022 12:42 pm

Re: Co-own Mortgage after... [divorce]

Post by toddthebod »

bberris wrote: Wed Jul 10, 2024 5:41 am You don't own a mortgage. You owe a note. The mortgage is the right to foreclose if you don't pay. Two people can be obligated by a note even if only one owns the house.
OP lives in a non-recourse state.
Post Reply