Should I let my spouse keep the house?
Allowing a spouse to keep a marital home during a divorce in Pennsylvania might not always be the wisest decision unless they can get a new, solo mortgage.
When getting divorced, it is not uncommon for at least one partner to want to keep the family home. This is understandable and can be an especially big draw for families in Pennsylvania with young children still at home. However, it is important that divorcing spouses do not let emotions make the decision about what to do with a house. Allowing one person to keep a marital home is a major financial decision.
The trap of the joint mortgage
As explained by Bankrate, even if a couple is no longer married, both persons will remain financially liable for an existing joint mortgage. This can be the case even if one person no longer lives in the home and even if the divorce decree indicates that one person is supposed to pay the mortgage.
For this reason, if one spouse is going to keep the house, that person should obtain a new mortgage in their name only. This is the only way to eliminate the financial responsibility of the other party.
A newly divorced person might find that their credit score and their income has declined due to their divorce. This could make it hard for them to be approved for a new home mortgage. Some people who will receive alimony may claim that as income to help their chances of getting a new loan.
A note about quit claim deeds
If one person is able to successfully obtain the new mortgage, they will then want to have their former spouse sign a quit claim deed relinquishing their interest in the home.
Regarding quit claim deeds, it should not be assumed that signing this and retaining an existing joint mortgage can be a way of eliminating financial responsibility. Time Money notes that lenders are very clear that mortgages and houses are two separate things. Therefore, a person who is named on a loan can still be responsible for payments even if they have no ownership in the property.
Other potential solutions
MortgageLoan.com indicates that it might be possible for divorce decrees to stipulate that one person should make mortgage payments as part of a spousal support agreement. This, however, should be carefully reviewed by an attorney especially in light of the new tax law that went into effect on January 1, 2019. This law eliminates the tax deduction for people paying alimony and may have a major impact on divorce settlements that would have previously included alimony payments.
Because of the serious financial consequences associated with missed mortgage payments, divorcing spouses in Pennsylvania should always consult with a lawyer before making any agreements about their homes.