Keep name on mortgage after divorce?

Submitted by yeldarUV t3_10pky3j in personalfinance

I’m in a weird predicament and am seeking some much needed help. My ex and I have been separated for a year and are getting a divorce here soon. We are both very amicable and there is no bad blood between us at all. The only issue that arised is that we purchased a home together in 2020 and got a great interest rate on the loan (around 2.5%). When we split I moved out into an apartment and she wanted to keep the home which I was fine with since I could not afford the monthly payments. To get me off the mortgage meant she had to refinance at a higher interest rate (let’s say 5-6%) and at that cost she wouldn’t be able to keep the house. I have kept my name on the mortgage until now but we are in the works of getting a divorce. I want to look for a house myself later this year also. We both have great credit btw 800+. Now since my name is still on the mortgage, my debt to income ratio is crazy. She has offered to pay me a monthly or annual amount to keep my name on the mortgage as well as half appreciation on the house at a later set date. She also threw out an idea of giving me her truck which is paid off worth around 30k.

My question is what would you guys do in this situation? I don’t mind keeping my name on the mortgage as I know she is really responsible financially etc but in this case I would need some type of compensation. What should this compensation look like? This route seems like a good idea right now as I could use the extra income to save for a down payment on a house. I have talked to family and they would definitely co-sign for me on a hole loan for a house if needed but am I missing anything here that could be bad here? Is this a horrible idea?

I don’t know too much about mortgages and loans so bear with me. Any help would be appreciated!

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HorizontalBob t1_j6l1ue3 wrote

Are there kids involved?

You've separated emotionally. You need to separate financially.

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yeldarUV OP t1_j6l2663 wrote

No kids involved. She has a son but from a past relationship. And yes agreed. We are both talking to divorce lawyers now to get things going. Our bank accounts were all separate, no prenup, she gave me back my half of the house down payment as well as the car down payment when I moved out.

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fizzlepop t1_j6lx8k5 wrote

Let her sell her own truck and get $30k from that which she can use to cover her expenses.

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Rave-Unicorn-Votive t1_j6l3am4 wrote

>My question is what would you guys do in this situation?

Hard no. I don't care how amicable the split.

If I'm in her shoes, if I can't afford the house on my own then I can't afford the house, tough cookies but much better in the long run. I'd sell the truck to help pay for the house before giving it to the ex as a bribe/quid pro quo.

If I'm in your shoes, I want to move on and not be tied financially to someone I'm not married to for the next two decades and not be able to get a house of my own during that time. (It's entirely possible that mortgage rates will never again be as low as your current rate during the life of your loan.)

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GeorgeRetire t1_j6l9oku wrote

>My question is what would you guys do in this situation?

There is no way in the world I would share a mortgage with someone to whom I wasn't married. Ask your lawyer to tell you all the things that could go wrong here.

Don't take the risk. Make a clean break of things.

And don't lean on family to co-sign a loan, ever.

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yeldarUV OP t1_j6lgqax wrote

Yeah, thinking of all the bad things that can happen is definitely making me steer the other way. Thanks for the input!

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violetvader t1_j6lg5k7 wrote

Sell the house!!! My ex and I had an amicable divorce and stayed on a mortgage together with the agreement that he would refinance within X amount of time to get my name off of it. Now there is a foreclosure on my otherwise impeccable credit and I hate him with every fiber of my being. Do not do it.

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yeldarUV OP t1_j6lgcfp wrote

Yikeeeees! Sorry it was worse case scenario! Definitely Noted!

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WillOTheWispish t1_j6l35bh wrote

You’re not going to be able to get another home loan if you’re still on the other mortgage. Or it will be very difficult. I get why you’re thinking about this, but it is a bad idea in the long run to be financially entangled once you’re divorced. If you’re wanting to move on you cannot be financially still in the same spot. You would also be much more hard pressed to get off the mortgage in the future if you needed to and had not taken care of it prior to divorce. The remedy would likely be more cumbersome and expensive legally speaking because it is not a regular equitable distribution issue, it would be some other form of legal suit that is not as straight forward. And goodness forbid you get your name off the deed and not off the debt!

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yeldarUV OP t1_j6l3sln wrote

Thank you for the advice! Yes the deed debt thing, I’m glad I am aware of this!

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CoffeeRun123 t1_j6l7vbx wrote

If your soon to be ex wife cannot afford it, you should both sell the house. If you want to give her a time frame to refinance, that would be fair.

You have to think of what you’d do if you meet and remarry in the future. Or even if you don’t, you may want to some day buy a home or make other financial choices in the future, your debt to income ratio will be affected.

What if she faces financial hardship in the future.

Too many problems that may arise if you keep yourself tied to this house.

Good luck.

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yeldarUV OP t1_j6l8aii wrote

Thank you for the reply and we’ll wishes. Yeah I’m thinking if we go that route of keeping my name on the mortgage I would only allow a certain amount of years. We talked about 2 years with monthly payments and my name has to be off by X date.

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SquareVehicle t1_j6lvnye wrote

That's just incredibly risky. And considering the last risk you took (marrying this person) didn't work out, then that's not really great odds.

It's one of those things that theoretically could work out OK and I get why you'd both consider it, but I'd just chalk it up to the cost of divorce and make a clean break. Unless you could literally make it a term in the divorce decree that she does pay you or something, but I doubt it's possible and enforcing that would be a massive pain. I'd do what your lawyer suggests, that's why you pay him.

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Puretest t1_j6mjhwk wrote

Something you might not have considered yet is, what happens if in a few years she remarries and her new husband who will now be paying 1/2 the mortgage wants his name on the deed/mortgage? It seems to me that the whole system is set up for a clean break.

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sephiroth3650 t1_j6muer9 wrote

What would I do in this situation? Make her refi the home, or sell the home. End of story.

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Pass_Little t1_j6l5bko wrote

When I divorced, I never could get a refinance on the unique property we had bought together that I had kept.

Although it is ideal that you refinance or sell, it certainly is common in a divorce for this to happen.

My advice is for you to determine your shared net worth and figure out how to divide that equally as of the sate of the divorce. If there is $50K equity in the house and she's going to end up with the house, then you need to send up with something worth $25K.

Or said differently: after the divorce, the net worth you both take from the marriage should be identical. If she's taking $25K of equity in the house, you should take $25K in equity in something else (car, cash, etc.)

From the point the divorce is final she should be 100% responsible for the house.

The other critical point is that for anything which isn't a clean break such as the house, you need to have in your divorce decree language that lets you take unilateral steps to prevent a default on the underlying loan. That is, if she stops paying, you can assume payments, and if you have to do this there should be serious penalties. There also should be language which permits you to either require immediate refinance or immediate sale if she stops paying. You'll want a lawyer to check out the language which gets used here.

What you're trying to do is to create a situation where you're being completely fair, yet protect yourself down the road.

I also understand the desire to get paid for having the mortgage on your credit report. If you want to add a term in there where you get paid $x per month for as long as your name is on the mortgage that doesn't seem unreasonable. I would avoid one time payments, as if she keeps that for 20 some odd years you'll want to be paid for 20 years. I might consider indexing it up over time, so that it becomes more and more advantageous for her to refinance. IE $100/month for the first year and increasing 10% per year thereafter. Not suggesting you use these figures, just using those as examples.

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yeldarUV OP t1_j6l6dwi wrote

Thank you so much for taking the time out on this reply. My head is kinda exactly where yours is at on this. The equal division makes a ton of sense. I thought about getting an appraisal soon to see if the cost of the house has went up and from there decide an initial payment from her. From there I would have something that states my name could be on the mortgage for X amount of years and by a certain time my name has to be off. We talked about 2 years to allow some time for interest rates to drop (or increase which would suck for her lol) During that time there could be a monthly comp until my name is completely off. At this time maybe another appraisal and split payment on that as well? I don’t know just spitballin lol.

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Anthropogenic_Noise t1_j6lro95 wrote

A potential increase in interest rates in those 2 years would suck for her, but for you too if you don't plan on renting forever.

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Pass_Little t1_j6ly3ek wrote

No need for the second appraisal, but the first one is a good idea. If you both want to save money, many real estate agents will also do a similar valuation for less money.

The point here is that at the point you divorce your house will be worth a certain amount and you'll owe a certain amount. The difference will be the equity. That amount needs to be split between you, 50/50 is usually the right ratio unless there is a serious reason not to. A good example of this type of reason would be for one of you to have depleted your life savings to make the down payment while the other one didn't contribute anything.

Once you're divorced, the house and equity isn't yours anymore. She's making all the payments, so she should get all the equity. Unless you have to repo it from her due to lack of her keeping up on the payments. So forget about a second appraisal. By getting divorced and letting her have the house you need to give up on any future benefits from it so don't tie any payments to the value of the house.

Instead any payment from her to you needs to be compensation for you tying up your available credit and taking on the risk that she will end up trashing your credit. Think of what a single missed payment will mean to your credit score. The fact that she can't afford the payment after a refinance indicates that this might be too much house for her, and she runs a high risk of default. I'd think somewhere in the range of $0 for the first few months, then add a figure such that she's paying about 1/4 what she's saving by not refinancing for the next year, than 1/2 then 3/4 then 1, then 1.25 and so on. (So if her payment would go up by $400 by refinancing, it would be $100 for the first year, $200 for the second, and so on).

You might also want to consider some sort of escrow account that is structured in a way that neither of you could withdraw money from it and which has a couple months of house payment in it. She'd make her payments to this account and The autopay on the loan would come from this account. You could monitor it to make sure a payment is not missed and if it is, it gives you a month or two to fix before a payment is missed.

One thing she needs to be aware of is that I don't know anyone who expects interest rates to go down in the near future. The fed continues to raise them fairly aggressively to try to get inflation under control. No one knows for sure but it wouldn't surprise me if the rates don't get lower than they are right now for at least a couple if not a few years.

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Kplow19 t1_j6lbr1s wrote

Rather than refinancing, is it possible for her to assume the loan at the current rate? Google mortgage assumption

Will depend on the terms of your mortgage

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yeldarUV OP t1_j6lgf6h wrote

Unfortunately not. That would have made things much easier!

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