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Mortgage issues during and after a divorce

Couples in California that are divorced or planning on separating legally may face difficulties regarding the loans attached to property that is owned jointly. For example, in the situation in which one spouse wishes to purchase a house, the other party might automatically be given interest in the new property. However, the other spouse can renounce to any claim in that property by signing a quitclaim deed.

If a couple is divorced and the home is awarded to one party in a divorce decree, the other party might not be released from responsibility for a standing loan agreement automatically. When this occurs, the credit score of the individual who is no longer living in the home might suffer if the other party finds it difficult to maintain payments because the mortgage lender still lists both parties as responsible for the debt. To fix this problem, the individual staying in the home could refinance the loan, removing the other party from liability on the new agreement.

In some cases, the ownership of the home might be decided by a buyout. When this occurs, the person who moves out of the property might seek reimbursement for some of his or her investment. Sometimes the person who is staying in the home might be able to use a cash out negotiated during the refinancing process to pay off a former spouse.

As this shows, individuals who are going through divorce proceedings may be confronted with complicated issues when negotiating the ownership of the family home. An attorney might be able to help a client prepare for negotiations regarding the property and other issues that might surface during divorce proceedings.

Source:, "How to Divide Your House in a Divorce", Scott Sheldon, July 09, 2014

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