Couples in the midst of a divorce are occupied with so many issues during the dissolution of their marital assets that they may not be aware of the consequences of every action taken, and how it can come back to bite them in the future.
Take for example, Quit Claim Deeds.
If one spouse is keeping the house, or buying the other spouse out of their interest in the property, the common task is to have the spouse who is selling or forfeiting their interest sign a Quit Claim Deed.
In California, a Quit Claim Deed releases a party of all ownership interest in the real estate.
If you are the one releasing your interest in the home, you may think "Great.
I'm off the property.
" Not necessarily true and here's why.
If you are named as a borrower on the mortgage of that property, the Quit Claim Deed will not release your responsibility for the mortgage.
You will no longer own the property - but you are still obligated for the debt.
Your lender does not care that you signed a Quit Claim Deed.
If your spouse (the one who keeps the home) does not make the payments, or allows the home to go into foreclosure, it will damage your credit history and credit score just like you still own it.
How Lawyers Try to Help To protect the interest of the party who is quitclaiming their interest in a home, lawyers will often include language in the marital settlement agreement that states that the spouse keeping the house is now responsible for any debt or payments after the Quit Claim Deed is filed.
That's a nice arrangement between you and your ex, but again, the lender on your marital home never sees that agreement and because both spouses are still on the loan, the one who signed the Quit Claim is at significant risk.
Here's a few examples: • When you go to buy your next home, the debt for the old one is still on your credit history.
Added to the new loan you wish to obtain, your income to debt ratios may be too high.
For some, this prevents them from buying again.
• If your ex misses a house payment, your credit score is negatively affected.
Even one missed payment can drop your score.
• Say for example you got lucky and your ex spouse did make the payments, and the loan on your old house is in good standing.
You may still need his or her involvement to secure your next loan.
If you try to buy again, your new lender may ask you to prove that you were not responsible for the loan on your old house, and require you to obtain 12 months of cancelled loan payment checks from your ex.
You may not want to leave yourself vulnerable to that situation.
• If your former spouse allows your former home to be foreclosed, you may be precluded from buying again for up to 7 years.
Other Options That May Work Better The cleanest way to part company with no future obligation regarding your former home is, of course, to sell it.
If that's not possible, and you are compelled to sign away your ownership interest through a Quit Claim Deed, have language added to your settlement agreement that states that your ex-spouse will refinance the property, in his or her own name, within a short term, like three to six months.
If your ex cannot qualify to own the home on his or her own, and you already know that, reconsider signing that Quit Claim Deed and sell the home.
Otherwise, you will remain connected to your ex financially and be dependent on his or her actions to maintain your good credit and your financial future.
Take for example, Quit Claim Deeds.
If one spouse is keeping the house, or buying the other spouse out of their interest in the property, the common task is to have the spouse who is selling or forfeiting their interest sign a Quit Claim Deed.
In California, a Quit Claim Deed releases a party of all ownership interest in the real estate.
If you are the one releasing your interest in the home, you may think "Great.
I'm off the property.
" Not necessarily true and here's why.
If you are named as a borrower on the mortgage of that property, the Quit Claim Deed will not release your responsibility for the mortgage.
You will no longer own the property - but you are still obligated for the debt.
Your lender does not care that you signed a Quit Claim Deed.
If your spouse (the one who keeps the home) does not make the payments, or allows the home to go into foreclosure, it will damage your credit history and credit score just like you still own it.
How Lawyers Try to Help To protect the interest of the party who is quitclaiming their interest in a home, lawyers will often include language in the marital settlement agreement that states that the spouse keeping the house is now responsible for any debt or payments after the Quit Claim Deed is filed.
That's a nice arrangement between you and your ex, but again, the lender on your marital home never sees that agreement and because both spouses are still on the loan, the one who signed the Quit Claim is at significant risk.
Here's a few examples: • When you go to buy your next home, the debt for the old one is still on your credit history.
Added to the new loan you wish to obtain, your income to debt ratios may be too high.
For some, this prevents them from buying again.
• If your ex misses a house payment, your credit score is negatively affected.
Even one missed payment can drop your score.
• Say for example you got lucky and your ex spouse did make the payments, and the loan on your old house is in good standing.
You may still need his or her involvement to secure your next loan.
If you try to buy again, your new lender may ask you to prove that you were not responsible for the loan on your old house, and require you to obtain 12 months of cancelled loan payment checks from your ex.
You may not want to leave yourself vulnerable to that situation.
• If your former spouse allows your former home to be foreclosed, you may be precluded from buying again for up to 7 years.
Other Options That May Work Better The cleanest way to part company with no future obligation regarding your former home is, of course, to sell it.
If that's not possible, and you are compelled to sign away your ownership interest through a Quit Claim Deed, have language added to your settlement agreement that states that your ex-spouse will refinance the property, in his or her own name, within a short term, like three to six months.
If your ex cannot qualify to own the home on his or her own, and you already know that, reconsider signing that Quit Claim Deed and sell the home.
Otherwise, you will remain connected to your ex financially and be dependent on his or her actions to maintain your good credit and your financial future.
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